Even before environmental, social and governance (ESG) investing became popular in the United States capital markets, ESG was already gaining ground in other parts of the globe. However, if ETF investors have a domestic bias to ESG in the U.S., funds like the MSCI USA ESG Leaders Equity ETF (USSG) can be a great pick.
USSG was developed in collaboration with Ilmarinen, Finland’s largest pension insurance company. The underlying MSCI USA ESG Leaders Index provides exposure to large- and medium-cap U.S. companies with high ESG performance relative to their sector peers.
For the ESG investor looking for value opportunities, USSG offers a 0.10% expense ratio. That’s 26 basis points lower than the category average.
Furthermore, the fund is up over 15% year-to-date:
A Repeat Performance in 2021 for ESG?
ESG has had a stellar year, rising above and beyond expectations in a rough 2020 year for the capital markets. Can ESG pull off a repeat performance in 2021?
“Environmental, social and governance investing is setting up for another big year,” a CNBC article said. “After an ‘extraordinary year’ in 2020, ESG-themed investments should continue their hot streak as interest in sustainable and socially responsible investing grows, MSCI’s Linda-Eling Lee told CNBC’s ‘ETF Edge’ on Monday.”
“We were not necessarily expecting this to be the year where ESG really takes off, but clearly it has attracted a lot of attention, both in terms of the companies and what they’re doing from an ESG perspective [and] certainly from a flows point of view,” said Lee, the global head of research for MSCI’s ESG Research group.
Lee mentioned climate change as one of the trends to watch in the new year.
“Despite all the lockdowns that we’ve had this year, we’re still on track for a world that is going to be too warm to sustain life as we know it, according to climate science,” Lee said. “You’re going to see lots more investors really shifting capital towards less carbon-intensive assets.”
Big tech has been one of ESG’s biggest backers as companies like Microsoft, Google, and Amazon have hopped on board the ESG bandwagon. They also represent USSG’s largest holdings as of December 17:
Clean energy has been a prime focus for big tech in the ESG space as noted by an OilPrice.com article: “Over the past half-decade or so, tech giants Google, Amazon, Facebook, and Microsoft have been dominating clean energy procurement and are looking to continue being renewable energy’s biggest customers.”
As such, more capital investment into ESG by big tech will help USSG’s case.
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