ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. The Responsible Investing Channel
  2. Right ESG Approach Could Deliver Long-Term Upside
The Responsible Investing Channel
Share

Right ESG Approach Could Deliver Long-Term Upside

Tom LydonMay 31, 2022
2022-05-31

Environmental, social, and governance (ESG) exchange traded funds are enduring some criticism this year on the performance front. However, flows data indicate that investors remain enthusiastic about ESG on a long-term basis.

That’s a positive sign for the ever-growing ESG ETF constituency, including established names such as the SPDR S&P ESG ETF (EFIV B+). ESG follows the S&P 500 ESG Index, and part of that allure is that the fund offers a simplified, streamlined approach to ESG investing.

That’s relevant today because so many advisors and investors who express interest in ESG also express concern that defining this style of investing is increasingly confusing.

“Currently, there’s no single standard for how ESG information should be analyzed and disclosed. Because of this, investors tend to rely heavily on generalized ESG ‘scores’ provided by a handful of vendors. Scores, however, have very little consistency across vendors, and none of them validate the link with firms’ performance on the E, S, or G dimension,” according to BlackRock research.

At its core, EFIV is designed to feature similar sector allocations to those found in the traditional S&P 500 while providing an ESG overlay. As such, EFIV’s lineup is reduced to a still-deep 308 stocks from the more than 500 found in a standard S&P 500 ETF. Even with its relatively simple approach, EFIV taps into some of the benefits of an ESG focus.

“ESG-related data also provides a distinct way to capture how companies, within each sector and industry, are innovating and adapting to thrive as the economy transitions to carbon neutrality. This is just one of the many powerful alpha opportunities that can be uncovered with ESG data analysis,” added BlackRock.

In other words, when an ESG strategy is constructed the right way, it can offer out-performance potential. For its part, EFIV is narrowly outperforming the S&P 500 while handily topping the widely observed MSCI USA Extended ESG Select Index.

In other words, EFIV can be an avenue for investors searching for not only a basket of companies with strong ESG credentials, but those with the ability to outperform over long time horizons.

“ESG goals are not just about investing in companies the promote the best environmental, societal, and governance outcomes. Rather, looking at the investment universe from the lens of an ESG prism gives investors an even more comprehensive framework for how to identify companies that are best positioned for future long-term profitability, and hence, alpha opportunities for investors,” concluded BlackRock.

For more news, information, and strategy, visit the ESG Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X