In the capital markets, there are trends that may be short-lived, and then there are megatrends that can endure the test of time. Environmental, social, and governance (ESG) investing has emerged as a megatrend, and is attainable for investors with funds like the SPDR S&P 500 ESG ETF (EFIV).
The fund seeks to provide investment results that correspond generally to the total return performance of an index that provides exposure to securities that meet certain sustainability criteria (criteria related to ESG factors) while maintaining similar overall industry group weights as the S&P 500 Index. Big tech dominates the fund’s top three holdings as of January 29: Apple, Microsoft, and Amazon.
In seeking to track the performance of the S&P 500 ESG 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 (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.
EFIV has gained about 17% the past year. Its performance comes in at just a 0.10% expense ratio.
President Biden Providing Tailwinds For ESG
Current U.S. President Joe Biden will bring a green agenda with him, including a strong focus on clean energy initiatives. This should provide tailwinds for ESG moving forward.
“Joe Biden’s administration is going to usher in an era of serious momentum for responsible and sustainable investing,” said Nigel Green, chief executive and founder of deVere Group. “This is not just because of the likely tougher approach to the use of fossil fuels and his campaign’s vow to take swift action to tackle the climate emergency."
“It is also because of the expected appointment of Gary Gensler to lead the SEC, who is likely to heavily reform and broaden ESG investing and corporate disclosure rules in the U.S.," Green added. “In doing such, we can assume that Gensler would have the major support on the Commission.”
ETF investors should keep a watchful eye on EFIV and consider the fund for getting that almost necessary ESG exposure in the current investing climate.
“Investors should keep a keen eye on this area and move to take advantage of the opportunities," finished Green.
For more news and information, visit the ESG Channel.