The coronavirus pandemic is obviously putting the hurt on many sectors, but the outbreak could actually be beneficial to the environmental, social and governance (ESG) space. Nigel Green, CEO of deVere Group, is forecasting that the pandemic will actually be a boon to ESG.
“The coronavirus pandemic will trigger a ‘skyward surge’ in sustainable, responsible and impactful investing over the next 12 months for three key reasons,” Green said in an International Investment report. “First, before the pandemic, research has revealed that investments that score well in terms of ESG credentials often outperform the market and have lower volatility over the long-run. Since the COVID-19 public health emergency up-ended the world, the latest broad analysis shows that ESG funds have typically continued to outperform others.”
Green also cited that the pandemic is putting more companies under an ESG microscope—one where public approval reigns.
“Second, the coronavirus pandemic has underscored the vulnerability and fragility of societies and the planet,” said Green. “It has underscored that increasingly companies will only survive and thrive if they operate with a nod from the wider court of public approval. It has underscored the complexity and interconnectedness of our world in terms of demand and supply, in trade and commerce – and how these can be under threat if not sustainable.”
Lastly, Green noted the changing behaviors of the demographics as the population ages and the majority begins to reflect the tastes of millennials.
“Third, demographic shifts will support the trend,” Geen added. “Millennials – those who were born in the time period ranging from the early 1980s to the mid-1990s and early 2000s – cite ESG investing as their top priority when considering investment opportunities. This is crucial because the biggest-ever generational transfer of wealth – likely to be around $30trn – from baby boomers to millennials will take place in the next few years.”
ESG Via an ETF Wrapper
Investors who want ESG exposure via an ETF wrapper can take 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.
For more market trends, visit ETF Trends.