With a dynamic clean energy initiative plan, a Biden administration could be a boon for the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG).

That’s a good sign for ESG investors who saw current U.S. president Donald Trump move towards precluding ESG investments from entering retirement accounts. Using the Department of Labor as its regulatory hound dog, President Trump’s move against ESG funds was deemed necessary since they “sacrifice returns and promote goals unrelated to financial performance.”

However, seasoned ESG investors may have something to say about that — ESG investing has been a boon to investors looking for gains amid the Covid-19 pandemic. The pandemic has also ravished emerging markets (EM), but investors’ fortunes could turn if they combine EM with ESG.

Enter the Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG) — this fund seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Emerging Markets 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 ESG performance relative to their sector peers.

MSCI EM ESG Leaders Index consists of large and mid-cap companies across 24 EM countries. The Index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market.

For investors who want the ESG performance and EM diversification in one fund, EMSG is a prime alternative to simply picking equities with exposure to both sectors. With the pandemic still affecting a majority of the globe, investors have to walk on proverbial eggshells when investing in EM.

EMSG Chart

Will a Blue Administration Benefit ESG?

Biden’s Democratic agenda could reverse the Trump administration’s pushback against ESG. Of course, funds engaged in ESG fought back as “more than 130 fund management and financial advisory firms have written letters opposing the plan since it surfaced in June. And the complaints keep coming,” according to a Pensions & Investments article.

“You can’t simply disentangle ESG from the risk-and-return analysis in a 21st century investment process,” said Jonathan Bailey, Head of ESG at Neuberger Berman Group LLC.

That said, it’s difficult to argue against EMSG’s returns: up 13% year-to-date and almost 20% the past year based on Yahoo Finance performance figures.

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