There’s no question environmental, social, and governance (ESG) investing has been one of the shining stars in a dull, gloomy 2020. ESG is more than likely here to stay and investors can access that staying power with ETFs like the SPDR S&P 500 ESG ETF (EFIV).
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of an index that provides exposure to securities that meet certain sustainability criteria (criteria related to environmental, social, and governance (“ESG”) factors) while maintaining similar overall industry group weights as the S&P 500 Index.
In seeking to track the performance of the S&P 500 ESG Index (the “index”), the fund employs a sampling strategy, which means that it is not required to purchase all of the securities represented in the index. Overall, EFIV gives investors:
- Investment results that, before fees and expenses, correspond generally to the S&P 500 ESG Index.
- Exposure to an index that is designed to select S&P 500 firms meeting certain sustainability criteria (criteria related to environmental, social, and governance factors) while maintaining similar overall industry group weights as the S&P 500 Index.
- Potential ESG core exposure, based on its focus on sustainability criteria and comprehensive market coverage of the flagship core S&P 500 Index.
The fund is up 14% year-to-date and with a 0.10% expense ratio, investors get performance at a low cost.
ESG is Here to Stay
ESG-focused ETFs have been the beneficiaries of investor interest in ETFs as a whole. With a more socially conscious investor, getting access to the issues they care about can be had via the convenience of an ETF wrapper.
“Money is pouring into exchange-traded funds that bill themselves as socially conscious,” a Wall Street Journal article said. “This year investors have put a record $27.4 billion into ETFs traded in U.S. markets that say they focus on environmental, social, and corporate governance, or ESG, practices, according to data from FactSet, doubling the size of the sector.”
“The surge suggests ESG investing has staying power, answering those who had questioned whether investors would give priority to goals such as promoting clean energy over simply picking the best-performing stocks regardless of companies’ principles,” the article added. “Expectations for new legislation aimed at combating climate change under a Biden administration are likely to stoke demand for ESG funds over the coming years, and several asset managers are rushing to meet that demand.”