ESG’s been a complicated place lately, with a lot of serious issues in play – both regulators like the SEC and the industry as a whole are about what ESG really means, and how best to guide the space’s rapid growth in the industry. For investors looking for an interesting spin on ESG exposure, consider the merits of an active non-transparent ESG ETF like the American Century Sustainable Equity ETF (ESGA ).
Sustainable flows have taken a hit this year compared to last, certainly, with for sustainably-marked funds. Part of the challenge remains in the fight over whether or not to define ESG and how to enforce those rules, with some bright spots as active fund launches have easily outpaced new passives this year as the space matures.
In such a landscape, protecting against front running could be important, as advisors look to serve ESG-hungry slices of the investor pool. That’s what an active non-transparent ESG ETF like ESGA might be able to provide.
As one of the still relatively rare active ESG ETFs, ESGA assigns ESG scores based on criteria like carbon emissions, digital privacy, and other issues, with only the highest-scoring firms making the cut. ESGA targets a narrower slice of large-cap stocks than other equity-holding funds, positioning the ETF as a potentially notable ESG addition to a large cap core.
The strategy receives an 8.3/10 ESG score according to VettaFi, reaching a 72% global percentile. The strategy charges a 39-basis point fee and has added $2.7 million in net inflows over the last three months.
ESGA has also seen an uptick in performance in recent months, outperforming both the ETF Database Category Average and the Factset Segment Average over the last month by 1% and 2.4% respectively.
There are a lot of ESG strategies out there, and with there is real value in a strategy that can actively navigate the markets and protect against front running. ESGA could be that strategy for investors looking at a different way to set up their ESG exposures.