The coronavirus pandemic has impacted the investing world, with market participants showing greater interest in conscious investing, spurring demand for environmental, social and governance (“ESG”) funds. According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, total U.S.-domiciled sustainably invested assets under management, including institutional and retail, rose 42% to $17.1 trillion compared with $12 trillion between 2018 and 2020, per a CNBC article.
Furthermore, MSCI’s Linda-Eling Lee has said to CNBC’s “ETF Edge” that ESG-themed investments should stay in demand considering the growing interest in sustainable and socially-responsible investing following an “extraordinary year” in 2020, as mentioned in a CNBC article.
Going on, 2020 is being called the “tipping point” year for ESG investments considering the huge inflow into the space, per an Oilprice.com article. The same article states that the largest asset manager in the world, BlackRock (NYSE:BLK), expects to have $1.2 trillion in ESG assets within the next 10 years. Going by the same write-up, President-elect Joe Biden, who is also being called the “green president,” will give a lot many reasons to investors for favoring the sustainable investment space. The space is expected to see favorable government initiatives, investments and federal policies under the Biden presidency.
In fact, a CNBC article states that some senior Biden officials are expecting another spending bill, primarily focused on climate change and infrastructure, among other initiatives to be introduced in February.
The alternative energy space is expected to get stronger under the Biden administration. Biden is expected to talk about the climate emergency on global platforms and ensure that the United States achieves a 100% clean energy economy and net-zero emissions, no later than 2050. Going on, Biden’s climate and environmental justice proposal will make a federal investment of $1.7 trillion over the next 10 years, leveraging further private sector and state and local investments to stand at more than $5 trillion.
Not only the coronavirus pandemic but other factors like protests against racism, geo-political tensions and changing climatic conditions are responsible for the growing popularity of sustainable investing funds. Riding on the surging demand, ESG funds are witnessing record inflows this year. Notably, ESG investing has shown some resilience and continues to gain investor attention amid the pandemic.
ESG ETFs in Spotlight
ESG investing is expected to keep gaining investors’ attention. Below we discuss a few ETFs that seek to provide exposure to ESG investing:
iShares ESG Aware MSCI USA ETF ESGU
The fund seeks similar risk and return to the MSCI USA Extended ESG Focus Index, while achieving more sustainable outcome. The fund provides exposure to higher-rated ESG companies, while accessing large and mid-cap U.S. stocks. The fund charges 15 bps in fees (read: ETF Areas Thriving During Coronavirus Pandemic).
Xtrackers MSCI USA ESG Leaders Equity ETF USSG
The fund tracks investment results that correspond generally to the performance of the MSCI USA ESG Leaders Index. Notably, the MSCI USA ESG Leaders Index provides exposure to companies with high ESG performance relative to their sector peers. The fund charges 10 bps in fees (read: ETF Areas to Ride the Thematic Investing Trend in Q4).
Vanguard ESG U.S. Stock ETF ESGV
The fund tracks the performance of the FTSE US All Cap Choice Index comprising large, mid, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling and nuclear power industries. It also doesn’t consider companies which do not meet the U.N. global compact principles and diversity criteria. It charges 12 bps in fees (read: 5 ETFs to Enhance Your Portfolio in 2021).
Nuveen ESG Large-Cap Growth ETF NULG
The underlying TIAA ESG USA Large-Cap Growth Index comprises large-cap equity securities and meets ESG criteria and exhibits overall growth style characteristics based on long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend and long-term historical sales per share growth trend. It charges 35 bps in fees.
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Nuveen ESG LargeCap Growth ETF (NULG): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
Vanguard ESG U.S. Stock ETF (ESGV): ETF Research Reports
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
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