It’s often said that voters have short attention spans, and the same is arguably true of politicians. The confluence of both factors could prove to be a source of encouragement for proponents of ESG investing.
Those positive vibes extend to ETFs like the Invesco ESG Nasdaq 100 ETF (QQMG ) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG ). Following a multiyear run in which ESG was a primary focus in Corporate America, stoking sizable inflows into related investment vehicles, it then became a hot-button political issue.
The ensuing controversy brought an unprecedented level of divisiveness to the ESG investing discussion. That prompted some companies to alter their messaging. It also compelled regulators to apply more scrutiny to ESG ratings and scoring. Some of the negativity appears to be waning.
ESG Controversies Exaggerated
There are credible reasons to believe ETFs such as QQJG and QQMG have staying power. Recent research from the Stanford Rock Center for Corporate Governance indicates ESG framing goes a long way toward improving investors’ attitudes.
“… the study used a series of decision tasks where respondents chose between two hypothetical pension fund options. Each option included an expected annual pension amount and several investment restrictions, such as avoiding companies tied to fossil fuels or gambling,” reported Steve Kerch for Equities.com.
Not surprisingly, the aforementioned political divide as it relates to ESG investing is along voting lines. Democrat voters and states are ESG supporters, while their Republican counterparts are ESG-skeptical.
What’s noteworthy for ESG proponents and issuers of funds like QQJG and QQMG is folks with conservative political leanings aren’t necessarily 100% ESG-averse. The Stanford study indicates those folks can be ESG-flexible provided they like the related messaging.
“The phrasing was key. Abstract concepts like ‘labor rights,’ which some may associate with a political agenda, led conservative respondents to prioritize profitability over social goals. Yet, when social causes were presented in more detail—such as ‘guaranteeing living wages’—support grew across the political spectrum,” added Kerch.
Studies suggest that even ESG detractors are willing to accept lower returns. But that’s provided that the companies they invest in aren’t engaging in harmful practices. Fortunately, subpar returns aren’t something committed QQMG and QQJG investors need to worry about. That’s because the ETFs have performed admirably relative to their non-ESG equivalents over extended holding periods.
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