Environmental, social, and governance (ESG) investing continues to show its mettle despite a challenging marketplace. ETF investors looking to further fortify their portfolios with ESG can look at funds 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.
ESG Resilient in the Face of Adversity
A State Street Global Advisors article speaks to the resilience of ESG:
“After several years of slow but steady growth, investor flows into environmental, social and governance investments has increased significantly in the months following the COVID-19 outbreak. According to Morningstar, over $80 billion flowed into global sustainable funds in the third quarter of 2020, an increase of 14% on the second quarter,” the article said. “Assets under management climbed 19% to a fresh high of $1.23 trillion. The bulk of flows came from European investors, but net inflows were also seen in the United States, Canada, Australia and New Zealand, Japan, and the rest of Asia. Notably, the European sustainable fund market grew 10% between the second and third quarters, compared with only a 1.6% increase in overall European fund universe assets.”
“This is all for good reason. Investors have been attracted to the resilience of ESG stocks during the pandemic. In a recent study, Fidelity found that stocks and bonds with higher ESG ratings outperformed those with weaker ratings in 2020,” the article added further. “Indeed, over the course of the year up to November 4, the MSCI ACWI ESG Universal index had an excess return of 1.6% against the standard MSCI index. And Bank of America has found that higher-ranked ESG companies in the United States, Europe, and Asia have seen lower downward earnings revisions for 2020-2021 expectations than lower-ranked companies.”
For more news and information, visit the ESG Channel.