Sustainable bond issuance has reached a global high with a total of $777.6 billion through the first nine months of 2021, according to a Reuters article.
This underscores the continuing popularity of ESG investing as more companies look to add ESG principles into their core business models. Issuance has risen 57% since the same time last year.
“Companies are looking for ways to be more sustainable and to demonstrate that to the market. An ESG bond issuance ticks both those boxes,” said Samuel Adams, CEO at Vert Asset Management. “They can raise capital for their ESG initiatives and highlight their commitment to sustainability to investors in the same go.”
ETF investors can get exposure to the ESG space with four funds from FlexShares: the FlexShares ESG & Climate US Large Cap Core Index Fund (FEUS), the FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM), the FlexShares ESG & Climate Investment Grade Corporate Core Index Fund (FEIG), and the FlexShares ESG & Climate High Yield Corporate Core Index Fund (FEHY).
The introduction of equities has already been a prevailing part of the ESG trend, but fixed income is now following suit. However, finding funds that address both asset classes specifically in the climate control arena can be a trying task.
“That’s why FlexShares has developed a new suite of ESG-oriented ETFs. Each of the four funds targets a different core equity or fixed-income asset class,” a Flexshares Fund Focus said. “All employ our sophisticated, proprietary risk-assessment methodology to seek an overall improvement in the portfolio’s ESG score, with additional emphasis on reducing carbon risk versus the benchmark. These improvements are designed to have minimal tracking error, so they can help deliver the market exposures that investors expect from their core investments.”
Vector Score Creation
ESG analytics is becoming a growing field as the investing space grows even larger. The availability of this raw ESG data has helped FlexShares develop a scoring methodology to help pick out the best investments.
“The ESG Vector Score is designed to focus on ESG-related business issues most likely to impact a company’s financial performance — and ultimately, a portfolio’s investment return,” the Fund Focus said. “Our scoring methodology employs a framework established by the Sustainable Accounting Standards Board (SASB), that identifies 26 categories of general sustainability issues that affect company performance,” the Fund Focus continued. “Then, SASB determined which of those issues are most relevant to a particular sector or industry.”
The economic impact of climate change is a top-of-mind concern to a number of investors, and now there are four funds to address this topic.
“We appreciate that climate change is a top concern among many companies, investors and regulators around the world,” the Fund Focus added. “Each strategy in our core ESG ETF suite incorporates a special focus on carbon risk in addition to other components of the overall ESG score.”
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