ETF Edge: How The ESG Explosion Fairs Alongside Protests | ETF Trends

Following a weekend of varying examples of civil unrest, there is plenty to look at in the form of an ESG explosion that ETFs inflows for funds centered on environmental, social, and governance factors climb significantly.

ETF Trends CEO Tom Lydon and S&P Dow Jones Indices’ Mona Naqvi appeared on this week’s “ETF Edge,” hosted by CNBC’s Bob Pisani, to discuss the current ESG boom. There’s a lot to go through as far as what is driving the ESG gains in relation to the protests and other resulting activities that took place over the weekend.

In terms of some basic understanding of how ESG has some correlation to the protesting taking place, Naqvi notes how strong convictions for issues that relate to governance, among other areas, connect to the way ESG incorporates these types of considerations into their investments. There are also areas such as diversity in hiring practices, among others, that also speaks to what ESG can help capture.

Turning to Lydon in regards to the inflows heading to ESG, and the tangential relation the activities from over the weekend, he states how it’s already a difficult time for companies, given the effects of Covid-19. However, this is a great time to approve of corporate values.

Lydon states, “Obviously, racism has no place in America, and the events of last week give corporate America an opportunity to reaffirm that their clients, employees, and shareholders of where they stand on this.”

Corporation Commitment

So on the other end of this, Lydon believes there’s a good opportunity for corporations to come out of this much better with a more significant commitment to the standards established with ESG issues. As made clear, there have been good flows, so far this year, but up until 2019, there’s been little over $20 billion in ESG ETFs in the U.S., a relatively low number.

This shows how many financial advisors have shown interest but little commitment. So, now, in addition to what’s going on, there are self-directed investors who are more committed, as well as advisors, because their clients will be demanding it.

Lydon also points out how there are many options when it comes to ESG funds, which may have left people taking a step back and considering how committed they are to values. With that in mind, given how much money is now allocated to the S&P 500, for example, among other areas, all of the choices out there make for a variety of angles to take, many of which allow for better improvement in a portfolio.

Watch Tom Lydon and Mona Naqvi Discuss The ESG Boom:

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