ETFs that capture environmental, social and governance, or ESG, principles can help people capture socially responsible investments, allowing investors to enhance their portfolios in a meaningful way that can positively impact the world.
ESG is seen as a means to manage downside risks, along with the potential to enhance returns.
“Data on ESG factors has become widely available in recent years, and I believe that digging deeper into ESG issues is our shared responsibility as investors. It’s not just about the feel-good elements, it’s about risk management,” Sharon French, Head of Beta Solutions at OppenheimerFunds, said in a note.
ESG investments have gained wider popularity in Europe, with much of the demand coming out of institutions. French pointed out that corporations in Europe are more focused on societal good, which is different than how we think about corporations in the United States but it is slowly starting to change.
However, in the U.S., French noted that investors are “not really voting with their dollars in U.S. retail markets.” ESG investment strategies currently outstrip demand, so therey’s a supply-demand mismatch, despite the voices calling for sustainable investing.
“We’re in the process of talking to our clients and financial advisors about what’s behind this disparity. Is it lingering skepticism about performance? Do advisors and investors understand the risk management benefits? We know that there are mixed messages in the marketplace and confusion around the lack of uniformity in nomenclature. For sustainable investing to take off in the U.S. retail market, we need to address these issues and provide more education to the investing public,” French said.
Socially Responsible ETF Strategies
Investors who believe in the positive attributes of a socially responsible ETF strategy may consider options like the Oppenheimer ESG Revenue ETF (NYSEArca: ESGL) and Oppenheimer Global ESG Revenue ETF (NYSEArca: ESGF).