As Las Vegas casinos slowly begin re-open, it might be time to double-down on environmental, social, and governance (ESG) in the capital markets. Even the effects of the pandemic couldn’t stop ESG from dramatically underperforming and more gains could be ahead as the space experiences exponential growth.
“We’re talking with advisors who are coming to ETF Trends and ETF Database all the time and you’re starting to see, just by the nature of them reading more ESG-related stories and looking at more ESG-related ETFs and digging down into their makeup, that there is definitely more interest there,” said Tom Lydon, CEO of researching platforms ETF Trends and ETF Database. “The fact that there’s been a little bit of outperformance is also great.”
Speaking again to the performance of ESG, the S&P 500 is down 3% for the year, while the S&P 500 ESG Index is down 3% comparatively. Within the index are familiar names, including Microsoft, Amazon, Alphabet, Apple, and Facebook.
“Those are the companies that not only are doing well in this coronavirus environment but probably, coming out on the other end of this, are going to continue to do well,” the CEO said. “And if those have high ESG scores, which they do, that does nothing but help improve the confidence of the average investor there. If they can not only invest in good companies from a profitability standpoint but good companies from a value standpoint, it’s the best of all worlds.”
Investors who want ESG exposure via an ETF wrapper can take look at 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. The underlying index is a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers.
For ETF investors looking for ESG exposure within the fixed income asset class, they can look to the iShares ESG U.S. Aggregate Bond ETF (EAGG). EAGG seeks to track the investment results of the Bloomberg Barclays MSCI US Aggregate ESG Focus Index, which has been developed by Bloomberg Barclays Capital Inc. with environmental, social and governance (“ESG”) rating inputs from MSCI ESG Research LLC pursuant to an agreement between MSCI ESG Research and Bloomberg Index Services Limited or an affiliate.