ESG has had a hard last few months, that much is true. It’s gotten politicized in a way that other aspects of the asset management world haven’t, but that doesn’t mean that ESG is going away. Finding an ESG strategy with solid returns is still an important part of advisors’ jobs in modern investing, and strong interest in ESG may merit taking a look at a profits-driven ESG ETF like the iMGP RBA Responsible Global Allocation ETF (IRBA).
Let’s look at ESG right now. As of last month, 81% of U.S.-based institutional investors were planning to increase their allocation to ESG products over the next two years according to a report from PwC — and 83% of their European peers said the same. Climate change and carbon emissions were listed as the top priority for U.S.-based institutional investors and money management firms with sustainability strategies.
Add in the much-vaunted “generational shift” in wealth management, in which younger generations are looking more for ESG than older cohorts, and it becomes apparent why advisors and investors are looking for the right ESG strategies. Still, not all ESG strategies have performed as well as they could have in the broad market selloff last year and in this rising rate environment, with some anticipating ESG strats generally to have some difficulties this year.
That’s why a profits-driven ESG ETF like IRBA can be a strategy to watch for advisors interested in ESG this year. The Richard Bernstein Advisors (RBA) strategies, which include IRBA as well as other ETFs and SMAs, focus on fundamentals with an emphasis on three key factors: profits, liquidity, and sentiment. The RBA approach analyzes corporate profits cycles to help guide its investments, going for defensive areas when profits drop and more cyclical options as profits rise.
The ETF, which is actively managed and charges 69 basis points, doesn’t look at specific stocks but rather uses ETFs to express the RBA investment committee’s views on the market. As a go anywhere ETF, expects to have an allocation of 65% to equities and 35% to fixed income — and crucially, IRBA only uses ESG ETFs.
Combine its emphasis on the profit cycle with its ESG approach and one can see the case for IRBA. The strategy outperformed the ETF Database Category Average and its Factset Segment Average over three months, returning 11.1%. For investors looking for an ESG strategy in such uncertain times, IRBA may be one to watch in the weeks and months ahead.
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