Environmental, social and governance (ESG) investing is starting to pick up momentum, according to research from global communications firm Edelman. As investors look ahead to 2020, one enduring theme could be the continued rise of incorporating ESG initiatives within investment themes.
“We are entering a new era when ESG factors are an important investment criteria for shareholders,” said Lex Suvanto, global managing director, Financial Communications & Capital Markets at Edelman. “Investors are now acutely focused on how employees and other stakeholders can impact the valuation of companies in which they invest.”
“A majority of investors are hiring more ESG staff and changing their voting and engaging policies to be more attentive to ESG risks. Boards of directors in particular must be ready to engage with shareholders on these topics, a clear break from the conventional approach of keeping boards of directors behind closed doors,” he said.
Other highlights in the report, according to 401k Specialist magazine:
- “Investors are investing more in ESG-excelling companies: More than half of investors believe that ESG practices positively impact trust, with 61% having increased their investment allocation to companies that excel when it comes to ESG factors.”
- “Investors are changing behavior to be more attentive to ESG: 87% of respondents said that their firms have changed their voting and/or engagement policy to be more attentive to ESG risks and 56% of investors globally are hiring more ESG-focused staff.”
- “Social media content matters: 96% of investors use one or more social platforms on a weekly basis. When evaluating a current or prospective investment, 82% of investors consult the company’s social media channels and 79% of investors consult company executive social media channels.”
How can ETF investors capitalize on the ESG space as it experiences expansion? One fund to look at is the FlexShares STOXX US ESG Impact Index Fund (BATS: ESG). The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the STOXX® USA ESG Impact Index.
The fund will invest at least 80% of its total assets (exclusive of collateral held from securities lending) in the securities of the underlying index. The underlying index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of ESG characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX® USA 900 Index, as determined by the index provider.
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