Environmental, social and governance (ESG) and sustainable investing have subjected to much criticism and political controversy. Despite those headwinds, these asset allocation styles remain popular with many market participants.
Alone, dedication to ESG and sustainable investing is positive for exchange traded funds such as the Invesco ESG Nasdaq 100 ETF (QQMG ) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG ). However, there’s more to the story. ESG investors are loyal to the cause and the size of the market remains substantial.
A recent report by US SIF indicates the domestic sustainable investing market is valued at $6.5 trillion, or 12% of the overall $52.5 trillion landscape. Undoubtedly, that’s large. The figure implies that ETFs such as QQJG and QQMG only need to capture small slivers of that dollar amount to be successful over the long-term.
Expect More ESG Growth
In what could prove to be added good news for ETFs like QQJG and QQMG, experts see growth ahead for ESG and sustainable investing — impressive, when considering the amount of criticism aimed at these styles.
“The expected growth of the sustainable investing market rhymes with the findings of a recent Morgan Stanley report that shows that more than 78% of asset managers and 80% of asset owners expect sustainable AUM and asset allocations to rise in the next two years, driven by new mandates and a more established track record for sustainable investing,” noted Morningstar analyst Leslie Norton. “The survey of more than 900 institutional investors globally during July and August 2024 was undertaken by the Morgan Stanley Institute for Sustainable Investing.”
In terms of performance, QQJG and QQMG have answered that bell this year, rising 16.20% and 29.59%, respectively. This helps to allay concerns that ESG investing means lost opportunity. Obviously, those returns are important on a standalone basis. This importance increases when considering the expectation that investor interest in ESG and sustainability remains robust for years to come.
“Investor interest in capturing the opportunity of the climate transition remains a huge opportunity for the industry,” Maria Lettini, the CEO of US SIF, said in a statement. “Broader global market trends, such as regulatory obligations, evolving client preferences, the transfer of intergenerational wealth, and the growing frequency and severity of financially material physical and transition risks associated with climate change, are certainly contributing to investors’ interest.”
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