Investors ready to pull the trigger on highly-touted environmental, social, and governance (ESG) investments might not know exactly where to start. The ESG pool has expanded exponentially over the years, but one place of exceptional strength is the S&P 500 and specifically, the Xtrackers S&P 500 ESG ETF (SNPE).
SNPE seeks investment results that correspond generally to the performance, before fees and expenses, of the S&P 500 ESG Index. The index is a broad-based, market capitalization weighted index that provides exposure to companies with high environmental, social and governance (“ESG”) performance relative to their sector peers, while maintaining similar overall industry group weights as the S&P 500 Index.
The fund uses a full replication indexing strategy to seek to track the underlying index. With a net expense ratio of just 0.10%, its gives the cost-conscious investor even more reason to act.
As of December 11, its fund holds big tech names like Apple, Microsoft, and Amazon. Big tech has been eponymously big on ESG as it looks to add a social investing component to its core business models.
It’s no surprise that SNPE is up almost 17% this year. The fund is trading just above its 50-day moving average and below its overbought levels via the relative strength index (RSI), so investors looking for an entry point might want to give SNPE technicals a closer look.
More Strength for ESG in 2021
What goes up must eventually come down and given ESG’s incredible run in 2020, it’s only prudent to expect the market to tick lower in 2021. However, while analysts don’t expect the ESG market to duplicate its 2020 performance, weakness is not at all ahead.
A Barron’s article analyzing 15 stocks to buy for ESG exposure noted that “sustainable and ESG investing revolution is set to continue in 2021, with investors looking for the next wave of opportunities, Morgan Stanley strategists said, as they revealed the 15 stocks to buy.”
“The investment bank’s strategists, led by Jessica Alsford, said the pace of ESG-related outperformance could slow in 2021, given the correlation to Quality stocks, which they expect to underperform Value. However, they noted that long term structural trends benefiting ESG names and indexes were ‘only likely to increase’,” the article added.
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