Unless you’ve been living under a rock (possibly to avoid COVID-19, so it’s forgivable), you’re well aware of the rising popularity of environmental, social and governance (ESG) investing in the capital markets. If you’re still not on the ESG bandwagon, then add some green to your portfolio with ETFs like the Xtrackers MSCI EAFE ESG Leaders Equity ETF (EASG).
EASG seeks investment results that correspond generally to the performance of the MSCI EAFE ESG Leaders Index. The fund will invest at least 80% of its total assets (but typically far more) in component securities (including depositary receipts in respect of such securities) of the underlying index, which is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
ESG has already proven it can perform in a down market the way it has handled the pandemic. After a strong performance in 2019 with a gain of about 24% according to Morningstar, the fund has a year-to-date gain of about 6% in 2020 despite this year’s challenges.
Furthermore, investors get all the positive gains with a low expense ratio of just 0.14%. Cost effective and a positive performer equates to a win-win for the discerning ETF investor.
Looking at its YTD chart, the fund experienced high volume in November, which probably speaks to the clean energy initiatives that a Joe Biden presidency will bring in 2021. That alone should provide some nice tailwinds for further gains in the ESG space.
The fund is already moved past its 50-day moving average in November as well so for traders looking for an entry-point, it might be worth noting that by applying a relative strength index (RSI) filter, the ETF has already moved into overbought territory. So a drop just before the end of 2020 could set up a buying opportunity for gains in 2021 as a long-term hold.
Don't Ignore the Strength of ESG ETFs
A recent article in the Financial Times by Michael Martin summed up the ESG phenomenon nicely:
“In conversations over the past 18 months with families and individuals I advise, green investing has become a big priority for them, either because they wish to invest in a future-proof way, or because their children have asked probing questions about where their money is invested — and millennial and Gen Z children are keener than ever not to inherit what they think of as ‘dirty money,’” Martin wrote.
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