Environmental, social and governance (ESG) investing can and will continue growing at epic proportions. To get in on the action, ETF investors should consider following the leaders in ESG with funds like the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG).
EASG seeks investment results that correspond generally to the performance of the MSCI EAFE ESG Leaders Index. The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index, which is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
“The ESG fund space has grown dramatically in recent years to the point that it may check all the boxes on your portfolio’s target asset allocations — including emerging markets, international developed markets, domestic large and mid caps, real estate, and domestic and international fixed income,” wrote Catherine Brock in Motley Fool in an article on ESG investing.
And now, the ESG space is expected to continue flourishing under President-elect Joe Biden. His clean energy initiatives should provide enough fodder for ESG investors to consider adding to their portfolios.
“And now, with President-elect Joe Biden on his way to the White House, ESG investing will likely continue to flourish as it benefits from a more favorable regulatory environment going forward,” Brock wrote. “As a starting point, Biden is expected to rejoin the Paris climate deal and reenact federal initiatives to reduce greenhouse gas emissions. More than that, Biden and running mate Kamala Harris are also likely to enact policies that go beyond the “E” in ESG, policies that encourage responsible corporate social and governance practices as well.”
Long-term ESG investors shouldn’t immediately build their portfolios around this incoming administration.
“If you are investing for the long haul, it’s always risky to overhaul your portfolio based on a four-year window of opportunity,” Brock added. “Once you start making investing decisions based on who’s in the White House, it becomes difficult to stop. You could find yourself in a perpetual state of trying to predict what will happen under this administration or the next. That’s not a good place to be, emotionally or financially. You’ll end up riding a stress rollercoaster every four years and, if you act on your predictions, you might inadvertently lower your investment returns, too.”
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