Morgan Stanley’s Foray into ESG Highlights Growing Space

It’s no question that environmental, social and governance (ESG) investing has been one of the few bright spots amid the Covid-19 pandemic. Global investment firm Morgan Stanley was quick to hope aboard the growing space, which only highlights the popularity of ESG.

“A bet on ESG and a rush among Japanese investors to own foreign stocks, particularly in the technology space, has proved to be a winning combination for a fund managed by Morgan Stanley Investment Management in the Asian nation,” a Bloomberg article noted.

“Launched last month, the Global ESG High Quality Growth Equity Fund, run by the U.S. asset manager and owned by Japan’s Asset Management One Co., raised an initial amount of 383 billion yen ($3.6 billion), the most for a new offering in Japan in 20 years, according to data compiled by Bloomberg,” the article added. “That’s also the second-biggest launch ever among all stock funds in the nation, behind the Nomura Japan Equity Strategy Fund, which back in 2000 had an initial value of 792.5 billion yen.”

“We want to have a good impact but also get the best returns for our shareholders,” Kristian Heugh, the manager of the fund at Morgan Stanley, said in an interview. “ESG is absolutely critical for the market to look at, for companies to look at, but we want to make sure that people don’t get too far in one direction or another because otherwise, it’s not going to work.”


^MSACWIESGF data by YCharts

Getting ESG Exposure via ETFs

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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