Getting core environmental, social, and governance (ESG) exposure is possible when holding exchange traded funds like the FlexShares STOXX US ESG Impact Index Fund (ESG).
Big tech companies have been one of the leaders spearheading the move toward incorporating more ESG factors into their core business processes. It’s something that chief technology officers (CTOs) need to take note of if they haven’t already.
“Environmental, social and governance (ESG) factors should be key considerations for CTOs and technology leaders scaling next generation companies from day one,” a Tech Crunch article explained. “Investors are increasingly prioritizing startups that focus on ESG, with the growth of sustainable investing skyrocketing.”
ESG’s holdings focus on big tech names. While the fund never over-concentrates its holdings in one single stock, the top three holdings are comprised of big tech giants—Apple, Microsoft, and Amazon.
However, its largest holding, Apple, only accounts for about 5% of the fund’s portfolio. This helps to reduce concentration risk and minimize volatility.
Per the fund description, 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.
Changing with the Times
Today’s investor prioritizes their values in addition to profits. The ESG movement has become a worldwide phenomenon that is likely to persist.
“Many investors have begun implementing ESG strategies that examine select ESG-related key performance indicators reported by public companies in their regulatory filings as a way to further assess a stock’s potential risk and returns,” a FlexShares Fund Focus article said.
The fund also prioritizes diversified core holdings.
“The FlexShares STOXX US ESG Select Index Fund is designed to use a bottom-up approach to portfolio selection to help improve sector diversity and manage potential tracking error,” the Fund Focus said. “By relying on a methodology that applies ESG scoring early in the selection process, the Fund integrates ESG principles with more traditional portfolio analysis tools to maintain a diversified core equity investment strategy while tilting toward ESG criteria.”
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