Cost-cutting has certainly been a prime measure for businesses to stave off a pandemic-inducing recession and environmental, social and governance (ESG) is one way to achieve this goal. It’s something investors can capitalize on with ESG funds.
“One of the great ways to control costs, especially protecting you on the downside, is to aggressively address your utility bills,” said Matthew Ganser, EVP of Engineering and Technology at Carbon Lighthouse.. “ESG is exactly aligned with that. So, you know, ESG investments can show a reduction in expenses to energy efficiency.”
However, cost-cutting isn’t the only component investors want to see. Obviously the second component is a return on investment.
“If you can demonstrate to them that an investment actually makes practical business sense, regardless of their belief in sustainability, climate change or the value of ESG, you help them start to realize that this actually saves money, improves their bottom line and helps improve the wellbeing or publicity of the building,” Ganser says. “You help them come to a conclusion: why would I not do that?”
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.
A few more funds to consider from iShares:
- iShares MSCI Global Impact ETF (SDG): seeks to track the performance of the MSCI ACWI Sustainable Impact Index, which is composed of positive impact companies that derive a majority of their revenue from products and services that address at least one of the world’s major social and environmental challenges as identified by the United Nations Sustainable Development Goals.
- iShares MSCI USA ESG Select ETF (SUSA): seeks to track the investment results of the MSCI USA Extended ESG Select Index composed of U.S. companies that have positive environmental, social, and governance characteristics as identified by the index provider. The underlying index is an optimized index designed to maximize exposure to favorable ESG characteristics while exhibiting risk and return characteristics similar to the MSCI USA Index.
- iShares ESG MSCI USA ETF (ESGU): seeks to track the investment results of the MSCI USA Extended ESG Focus Index. The underlying index is an optimized index designed to reflect the equity performance of U.S. companies that have favorable ESG characteristics (as determined by the index provider), while exhibiting risk and return characteristics similar to those of the MSCI USA Index (the “parent index”).
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