More Companies Offering ESG Fixed-Income Funds as an Option

As more and more investors seek refuge in the bond markets, which can fuel more growth in fixed income exchange-traded funds (ETFs), product differentiation can help spur more innovation in the space. One of those areas experiencing growth is more fixed income funds incorporating environmental, social impact and governance (ESG) features like OneAmerica, which has added 12 ESG Investment offerings to its Group Annuity platform, after an increasing interest in ESG investing over the last six months.

“For some, the value of an investment is no longer just about returns, but about returns that are achieved in concert with making a positive impact on society and the world at large,” said Sandy McCarthy, president of OneAmerica retirement services. “ESG indexes can achieve these dual ideals, because as Morningstar research shows1, they favor companies with healthier balance sheets, stronger competitive advantages, and lower volatility than their mainstream counterparts.”

Between 2016 and 2018, sustainable, responsible, and impact investing grew at a more than 38 percent rate, rising from $8.7 trillion in 2016 to $12 trillion in 2018, according to the U.S. Forum for Sustainable and Responsible Investment.

Investment professionals use standard criteria to evaluate potential investments to determine if they qualify as an ESG investment option. These criteria include:

  • Environmental criteria consider how a company performs as a steward of nature
  • Social criteria examine how a company manages relationships with employees, suppliers, customers, and the communities where it operates
  • Governance deals with a company’s leadership, executive pay, audits, internal controls and shareholder rights

“We provide a full range of investment options, and ESG investing is appealing to a segment of the retirement plan participant community who want to invest in things they believe in to make a positive impact on society and the world at large beyond just returns,” said Terry Burns*, managing director, products & investments, Retirement Services. “To these investors there are investment options out there that think the way they think. Our broad menu of ESG funds satisfies that desire.”

ESG funds were added during the second and third quarters. Adding these investment options to the group annuity platform means they are now fully available to OneAmerica clients.

The news highlights ESG continuing to permeate through the capital markets. Just recently, data provider Scientific Beta has announced that it is now providing an ESG option for all of its indices.

The ESG option enables investors to benefit from the performance of Scientific Beta’s High Factor Intensity (HFI) Multi-Beta Multi-Strategy (MBMS) indices while upholding ESG norms and materially reducing exposure to companies with high exposure to ESG risks.

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