ESG On the List of CFOs’ Priorities for 2021 | ETF Trends

Thanks to the Covid-19 pandemic, 2020 is one year that everyone wants to forget, including chief financial officers (CFOs). Speaking of which, a Forbes report noted that CFOs are placing a high priority in 2021 on environmental, social, and governance (ESG).

More and more companies are beginning to see the value that ESG can bring—not only in terms of investing in the initiatives they care about but also its relative performance. ESG was one of the stellar performers even amid Covid-19.

“Many companies recognize that investing in ESG is the right thing to do, but the real incentive comes from evolving stakeholder expectations,” a Forbes report said. “In 2021, customers, employees, suppliers, investors and the communities in which companies operate are likely to place even greater pressure on companies through their consumption choices, preferences regarding the organizations they want to work for and with, and calls for greater transparency on ESG.”

“That is why CFOs and their C-suite peers should monitor how marketplace expectations are evolving for ESG initiatives and evaluate how their organizations can best optimize the value they derive from existing ESG efforts and leverage opportunities for related strategies and new investments,” the report added.


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ETF Opportunities in ESG

Investors who want ESG exposure via an ETF wrapper can take a 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.

One ETF with a focus on low carbon emissions is the iShares MSCI ACWI Low Carbon Target ETF (CRBN). The fund seeks to track the investment results of the MSCI ACWI Low Carbon Target Index, which is designed to address two dimensions of carbon exposure – carbon emissions and potential carbon emissions from fossil fuel reserves.

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