By now, most ETF investors know about environmental, social, and governance (ESG) investing, but if you’re late to the party, you can start with broad exposure within the S&P 500 with funds like 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 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%, it gives the cost-conscious investor even more reason to act.
Given the way ESG funds have performed in 2020, it’s no surprise that SNPE is up almost 17% within the past year. The fund has been on a steady uptrend when looking at its one-year chart with a retracement back to its pre-pandemic levels by the end of August 2020.
Since then, the fund’s been continuing to climb.
Furthermore, SNPE represents a solid buying opportunity as its relative strength index (RSI) is below overbought levels. Even if it falls below its 50-day moving average in the near term, that will only represent a 3% drop in price.
Forthcoming Trends in ESG
What’s ahead for ESG in 2021? A Morningstar interview with Hortense Bioy, Director of Sustainability Research at Morningstar, touched upon that topic.
Bioy mentioned climate change and human capital management as specific areas to watch:
“Yes, climate change and the risk associated with it, I think that will continue to rise on the public and corporate agenda,” said Bioy. “If there was a silver lining in the coronavirus pandemic, is that it has forced many people and companies to think about sustainability issues and climate change in particular. People now are no longer thinking that climate change is an abstract externality and something that is not going to affect them. This year, we’re going to see more companies talk about climate change and disclose more information and data on how it will impact the businesses so investors can make better-informed decisions.”
“Yes, another ESG theme for this year certainly is human capital management which captures issues such as diversity and inclusion, but also employee engagement and skills development,” Bioy added.