Even though the coronavirus pandemic rained down some heavy sell-offs during a tumultuous first quarter, environmental, social and governance (ESG) funds were holding steady with inflows globally.
Per a ThinkAdvisor report, fund flows “did much better in the first quarter compared with overall global funds. Although assets globally in environmental, social and governance focused funds were down 12% to $841 billion at the end of March, according to the latest Morningstar sustainable fund flows report, that was better than assets in the overall global fund universe, which were down 18%. Further, inflows to global sustainable funds were $45.6 billion, compared to outflows of $384.7 billion in the overall fund universe.”
When it came to certain parts of the globe, it was Europe that continued to see the majority of ESG fund flows.
“Europe continued to dominate the space, according to the report, with 76% of the 3,297 total funds and 82% of the assets ($684 billion),” the report noted. “However, the United States, with more than $119 billion in assets (14% of global sustainable assets), had flows of $10.5 billion, “easily eclipsing the previous quarterly record set in 2019′s fourth quarter,” states the report. Also, that jump accounted for a higher proportion of all global sustainable inflows compared with previous quarters.”
“Continued inflows in the first-quarter 2020 speak of the stickiness of ESG investments,” the Morningstar report said. “Investors in sustainable funds are typically driven by their values, invest for the long term, and seem to be more willing to ride out periods of bad performance.”
Investors who want ESG exposure via an ETF wrapper can take look at 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. The underlying index is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
An additional fund to look at is the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE Arca: USSG), which has been a popular play for investors seeking exposure to socially responsible investments. USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high ESG performance relative to their sector peers.
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