If there’s one element in the environmental, social, and governance (ESG) equation that companies, governments, fund issuers, and asset allocators have long grappled with, it’s the “S.”
That’s not surprising because social causes and issues are broader and more fluid, particularly from an investment perspective, than are environmental and governance issues. While there’s some implied difficulty on the social front, there is some good news. First, more investors are demanding that companies prioritize social issues.
Second, some corporations are paying attention to those demands. Third, a growing number of exchange traded funds are socially inclined — a group that includes the newly minted Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF NYSE.
The actively managed CDEI debuted in January and could enjoy long-term success as more market participants embrace social investment solutions and as more stakeholders drive positive, structural social change.
CDEI Appealing to Values-Based Investors
While CDEI is a new ETF, it doesn’t lack for a potential audience. That’s particularly true when considering that a slew of studies and surveys confirm that Millennials and Gen Z want investment products that reflect their personal values. That adds to the relevance of this ETF.
“It’s becoming clear that corporate purpose and culture are critical considerations for prospective and current employees, as well as end customers themselves who are prepared to vote with both their wallets and their feet,” noted Mike Camfield, head of EMEA sustainability research at Morgan Stanley.
CDEI could also appeal to values-based investors due to its emphasis on diversity, equity, and inclusion (DEI). Some obvious pillars define DEI. However, it’s also an arguably broad concept — much like sustainability is with the “E” in ESG. That breadth could work in favor of CDEI in terms of gaining traction among investors.
Camfield highlighted some social issues that are likely to take center stage in the years ahead. Those include access to healthcare, more emphasis on fitness and nutrition, “social infrastructure, which includes mobility, digital and communication systems,” broadened access to education and relevant technology, and inclusive finance.
Each of those concepts matter to investors mulling CDEI because success among that quintet is likely dependent on technology, financial services, and healthcare firms. Those sectors combine for about 72% of the ETF’s weight. Add in the notion that healthier eating is part of the better healthcare/fitness equation, and CDEI’s 7.52% weight to consumer staples stocks is relevant, too.
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