Harsh, often politically driven criticism of environmental, social, and governance (ESG) investing may have overstepped its bounds and likely won’t have much long-term impact. That’s the view of Chuka Umunna, JPMorgan’s global head of sustainable solutions, who made comments to that effect at the Reuters Energy Transition conference in London.
Should that thesis prove accurate, it could compel advisors and investors examine exchange traded funds such as the Invesco ESG Nasdaq 100 ETF (QQMG ) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG ). While ESG investing took plenty of lumps, much of it from political circles, over the past couple of year, many large companies remain committed to sustainability although they might be discussing it less than they did a few years ago.
With 2024 being a presidential election year, politicians are focusing their efforts elsewhere, taking ESG investing out of the negative spotlight. That coupled with waning outflows and ongoing enthusiasm for this investing style among plenty of professional and retail market participants could set the stage for brighter long-term trajectories for ETFs such as QQMG and QQJG.
With ESG, Talk Is Cheap
In life and in investing, talk is cheap. Investors want substance and that’s applicable in the ESG realm where a case can be made that criticism of this way of investing may have overreached.
“If you peel away all the noise and look at what investors are doing, it isn’t so different, albeit they may not be using the labels quite in the way that we do in Europe," Umunna said at the Reuters conference. “The U.S. is not so much pulling back because of the weaponisation of the term ESG, the reality in the States is more complex than that.”
Regarding substance, QQMG and QQJG have that. Over the past year, QQMG returned 35% while QQJG surged 24.11%. Both ETFs currently resided near their respective 52-week highs. At the very least, that return data indicate critics’ assertions about ESG performance are misguided.
The technology sector has contributed to those impressive results. It’s the largest sector exposure in both QQJG (45.51%) and QQMG (60.64%).
“Tech stocks became go-to picks for many such funds, because they made outsized market gains while producing fewer greenhouse gases than stocks in other sectors like manufacturing and energy,” according to Reuters.
Some of the marquee holdings in the large-cap QQMG are reporting lower year-over-year emissions or deploying carbon offsets to deal with increased power demands caused by artificial intelligence (AI) needs and expansion.
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