When it comes to buy-and-hold investments, one option to consider is environmental, social and governance (ESG) investing—right now, it’s what long-term investors are looking at following an increased interest in the space as of late.
“Long-term investors—those who have perpetually flagged the kind of systemic and workforce issues that now face companies everywhere—are having an outsized influence during this global crisis,” a Bloomberg article said. “Part of that is the surge in interest in ESG investing.”
“UBS this week said it saw flows to ESG funds and pandemic bonds of more than $71 billion in the second quarter, bringing its ESG assets under management to $1 trillion for the first time,” the article added. “Citing Morningstar data, the firm found that 56% of sustainable funds outperformed their peers in the second quarter. Sustainable investors will likely keep the wind at their backs as governments push green stimulus, the Swiss bank’s analysts said.“
A byproduct of the Covid-19 pandemic is that it raised more awareness to an already growing space of environmental, social and governance (ESG) investing. As such, it translated to record inflows for ESG.
“Investors have injected record sums into sustainable investment funds during the coronavirus pandemic, providing a glimmer of hope to active managers battered by the relentless flight of capital into passive products,” a Financial Times article noted. “Funds that invest according to environmental, social and governance principles attracted net inflows of $71.1bn globally between April and June this year, pushing assets under management in the products to a new high of just over $1tn, according to Morningstar.”
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.
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