Assets under management for ESG and sustainable funds peeled back this year. Harsh political rhetoric aimed at this style of investing and lack of regulatory clarity are among the reasons some market participants reduced ESG exposure.
However, ETFs such as the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG ) and the Invesco ESG Nasdaq 100 ETF (QQMG ) have delivered impressive performances this year. That confirms ESG investing still has merit. And steps are being taken to make ESG and sustainability-linked investing more appealing to a broader audience.
Take the case of the recently unveiled Nasdaq Sustainable Lens. That’s relevant when discussing QQJG and QQMG because both Invesco ETFs track Nasdaq indexes.
“In response to trends and technology advancements, the Nasdaq IR Intelligence team has developed Nasdaq Sustainable Lens. It is an ESG intelligence platform that harnesses the power of AI to help companies make better decisions faster, boost productivity, and enhance credibility,” according to Nasdaq.
Nasdaq Sustainable Lens Leverages Technology
One of the headwinds that’s stood in the way of more ESG ETF adoption among advisors and retail investors is that, as the investing style has gained prominence, so have the emotional-fueled debates surrounding ESG.
In other words, some companies can make ESG claims with little to support those assertions. When they’re later exposed for that boasting, investors can become confused about ESG definitions. That can be to the detriment of ESG adoption. By leveraging technology, including artificial intelligence (AI), the Nasdaq Sustainable Lens removes emotion from defining ESG.
“Nasdaq Sustainable Lens’ AI workflows were leveraged to review and analyze documents from approximately 7,200 companies globally. The findings indicated that only 44% of the 7,200 companies analyzed currently provide climate-related disclosures aligned with the Corporate Sustainability Reporting Directive (CSRD), International Sustainability Standards Board’s (ISSB) sustainability and climate-related standards and U.S. Security and Exchange Commission’s (SEC) proposed rules,” added Nasdaq.
The regulatory depth supported by the Nasdaq Sustainable lens is crucial. That’s because if there are certainties regarding ESG investing, then more stringent regulations on the way. Many market participants support that because they want clarity, not greenwashing.
Nasdaq noted that 44% of the 7,200 analyzed companies currently provide climate-related disclosures. It added that three-quarters do so on issues pertaining to social and governance. As those percentages increase, so too could the audience for products such as QQJG and QQMG.
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