The rise of environmental, social, and governance (ESG) investing could be spawning a more diligent investor who plays by their own rules. According to industry panelists, ESG investors are relying on their own due diligence when it comes to deciding their investments.
“Investors are increasingly creating their own proprietary ESG research and scoring methodologies, although they continue to use ratings firms as a key source of information, according to speakers at IR Magazine’s ESG Integration Forum – Summer 2020,” an IR Magazine article noted. “The forum, which took place last week in a virtual format, tackled issues such as the impact of Covid-19 on ESG reporting, the outcome of this year’s AGM season, and developing a sustainability program during a pandemic.”
“In one session, panelists discussed the evolving way in which investors are using the information provided by ESG ratings firms, such as MSCI, ISS, Sustainalytics, and S&P Global, which operates the Dow Jones Sustainability Indices,” the report added. “Companies continue to receive significant requests for ESG information but it is not always clear how that data is being used by ratings firms and buy-side end-users.”
ETF investors looking for plays in ESG can look to funds like the FlexShares STOXX US ESG Impact Index Fund (CBOE: ESG). For investors who want ESG exposure, as well as global diversification, can look to the FlexShares STOXX Global ESG Impact Index Fund (CBOE: ESGG).
ESG seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® USA ESG Impact Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to ESG characteristics relative to the STOXX® USA 900 Index, a float-adjusted market-capitalization weighted index of U.S.- incorporated companies. Under normal circumstances, the fund will invest at least 80% of its total assets in the securities of the underlying index.
ESGG seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® Global ESG Impact Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to environmental, social, and governance characteristics relative to the STOXX® Global 1800 Index, a float-adjusted market-capitalization weighted index of companies incorporated in the U.S. or in developed international markets. The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index.
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