Clean energy alternatives and lower carbon emissions are only a couple of reasons within a larger set of benefits offered by environmental, social, and governance (ESG) investing. One report suggests that ESG initiatives can also have a positive effect on workforce sentiment—something that more than likely took a hit following the higher number of unemployment filings due to the Covid-19 pandemic.
“Recently, Marsh & McLennan issued a report entitled ESG as a Workforce Strategy report asserts that ESG performance can have a positive impact on workforce sentiment, which can be a major competitive advantage for companies,” a Forbes article noted. “According to the report, top employers, as measured by employee satisfaction and attractiveness to talent, have significantly higher ESG scores than their peers – a pattern that is partly due to these companies’ relatively strong environmental performance, but the trend is also present across social and governance issues.”
ESG is also having a profound effect on attracting talent as well as cultivating leadership skills.
“Likewise, employers that make greater efforts to understand employee sentiment tend to achieve greater employee satisfaction and attractiveness to young talent, and these same leading companies tend to have more diverse leadership,” the article stated further.
ESG ETF Exposure
Investors who want ESG exposure via an ETF wrapper can take a 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.
An additional fund to look at is the Xtrackers MSCI USA ESG Leaders Equity ETF (USSG), which has been a popular play for investors seeking exposure to socially responsible investments. 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.
One ETF with a focus on low carbon emissions is the iShares MSCI ACWI Low Carbon Target ETF (CRBN ). The fund seeks to track the investment results of the MSCI ACWI Low Carbon Target Index, which is designed to address two dimensions of carbon exposure – carbon emissions and potential carbon emissions from fossil fuel reserves.