eResearch | It is important to fully understand the growing importance of ESG (environmental, social and governance) investing and the many different ETFs that are available to invest in and this article does just that.
An original article by Lorimer Wilson, Managing Editor of munKNEE.com – Your KEY To Making Money!
Below are 7 reasons for the growing importance of ESG investing, namely:
- Countries are beginning to embrace sustainable strategies and the overall demand for sustainable funds is expected to continue on this upward trend.
- Governments of 60 countries are working towards a net-zero emissions future, in which greenhouse gas emissions are reduced or offset.
- Industries reliant on energy needs from fossil fuels are beginning to shift to renewable energy in an attempt to achieve the goal of net-zero emissions by 2050.
- Companies are becoming much more conscious of ESG criteria far beyond the environment.
- Consumers want to know to what extent companies are taking ESG considerations into account in their operations and the extent to which they are doing so to ensure their purchases will be sustainable.
- Investors are seeing a unique opportunity to tap into the ESG market given the billions of dollars flowing into the energy transition.
- The investment landscape is changing with the demand for sustainable fixed income strategies also growing rapidly in addition to equities.
ESG Investing
ESG investing requires positive answers to the following questions regarding:
- Environment:
- What is the company’s attitude toward climate change?
- To what extent is the company attempting to minimize its carbon footprint?
- How does the company manage its environmental impact?
- How does the company handle air or water pollution arising from its operations?
- How much progress has the company made in utilizing renewable energy sources?
- How sustainable are the company’s efforts in its supply chain?
- Social:
- How does the company improve its social impact?
- Does the company offer fair levels of compensation for employees?
- What are the companies’ policies regarding LGBTQ+ equality, racial diversity and inclusive hiring practices?
- How does the company advocate for social good in the wider world, beyond its limited sphere of business?
- Governance:
- How do management and the board of directors address the interests of the company’s employees, shareholders, and customers?
- Is executive compensation balanced compared to pay for other employees?
- How does the company’s board and management drive positive change?
- Does the board foster diversity in leadership?
- Are its interactions with shareholders positive?
According to J.P. Morgan Asset Management a full 69% of retail investors are interested in ESG, yet only 10% actually invest in products that incorporate ESG factors, probably because they don’t know how to go about it. If that is your reason for not doing so, check out the munKNEE ESG Index of 11 ETFs below. It identifies:
- The sectors best performers YTD(specifically, as of Friday, April 8th), in descending order,
- Their individual ESG score (a high ESG rating means a company is managing its environment, social, and governance risks well relative to its peers) and
- Hyperlinks to 2 areas of additional information which are imperative for any individual considering investing in the ESG sector, namely:
- The fund name, hyperlinked to provide a description of the fund and an analysis of its stock,
- The trading symbol, hyperlinked to additional financial data and commentary on the company and
- Nuveen ESG Mid-Cap Value ETF (NUMV): +27.2% YTD; ESG Score: 7.2
- SPDR® S&P 500® ESG ETF (EFIV): +24.9% YTD; ESG Score: 8.4
- Xtrackers S&P 500 ESG ETF (SNPE): +24.5% YTD; ESG Score: 6.5
- Nuveen ESG Large-Cap Value ETF (NULV): +21.8% YTD; ESG Score: 7.7
- Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): +21.8% YTD; ESG Score: 6.4
- iShares ESG MSCI USA Leaders ETF (SUSL): +21.6% YTD; ESG Score: 7.5
- iShares ESG MSCI USA ETF (ESGU): +17.7% YTD; ESG Score: 6.5
- MSCI USA ESG Select ETF (SUSA): +17.4% YTD; ESG Score: 6.6
- Nuveen ESG Large-Cap ETF (NULC): +17.2% YTD; ESG Score: 8.4
- Vanguard ESG U.S. Stock ETF (ESGV): +14.7% YTD; ESG Score: 6.8
- Nuveen ESG Large-Cap Growth ETF (NULG): +10.9% YTD; ESG Score: 6.0
The above 11 ESG ETFs are UP +18.9% YTD, on average, and have an average ESG score of 7.1.
I trust the above information helps you better understand why ESG investing is becoming so important, which ESG ETFs have high ESG scores and how well they are trending in the early days of 2022.
Notes: All numbers in CAD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article and may have been paid by a company mentioned in the article or research report. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the Company’s management as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eResearch’s full disclaimer.
