Environmental, social and governance (ESG) strategies are showing their resilience amid the coronavirus outbreak and more importantly, are exhibiting strong performance. Much credit can go to ESG strategies that are able to minimize risk by limiting exposure to certain areas of the market that have been the hardest hit by the pandemic.
“Performance has held up quite well,” said John Streur, president and CEO of Calvert Research and Management, referencing Calvert’s U.S. index fund, which is beating its benchmark by 110 to 120 basis points. “It is clear that companies that have been thoughtful about managing social and environmental risks were prepared to deal with this risk.”
“The next few weeks are really going to tell the story of how companies navigate this crisis,” Mr. Streur said. “This crisis really makes the point that non-financial factors can really have an impact on long-term valuation. We are going to be thinking as a society what other risks are sitting out there that could really impair the value of the assets.”
Investors who want ESG exposure via an ETF wrapper can take look at the FlexShares STOXX US ESG Impact Index Fund (BATS: ESG). The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® USA ESG Impact Index.
The fund will invest at least 80% of its total assets (exclusive of collateral held from securities lending) in the securities of the underlying index. The underlying index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of ESG characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX® USA 900 Index, as determined by the index provider.
BlackRock’s iShares brand supports some of the most widely held ESG ETFs, including the iShares ESG MSCI USA Leaders ETF (SUSL), iShares MSCI KLD 400 Social ETF (NYSEArca: DSI) and the iShares MSCI USA ESG Select ETF (NYSEARCA: SUSA).
Other options include 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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