ESG ETFs to Shine on Increased Demand Amid Coronavirus Crisis
The coronavirus crisis has enhanced focus on conscious investing, boosting demand for environmental, social and governance (ESG) funds. Moreover, increasing awareness about ESG funds among companies marked by continued technological advancement and digital revolution has been observed since the pre-pandemic era.
Going on, according to Morningstar, 23 new ESG funds have been launched in 2020 and it is expecting a record number of launches this year (per a CNBC article). According to the same article, net inflows in U.S. sustainable funds in 2020 are expected to surpass the record net flows in 2019, which were four times the previous high.
In a recent note to its clients, Goldman Sachs commented that “prior to this crisis there was a meaningful and increasing focus on ESG investing and it is likely that this focus will only increase following the coronavirus,” per a CNBC article. Going on, JPMorgan also commented that “we see the Covid-19 crisis accelerating the trend to ESG investment.”
ESG investing has shown some resilience and continues to gain investor attention amid the coronavirus pandemic. Going by Morningstar Direct’s data, investors spent at least $12.2 billion on ESG funds in the first four months of 2020, per The Wall Street Journal report. The report also highlights the resilience of ESG funds, which mostly generated better-than-average returns in comparison to the broader S&P 500 index.
Going by the report, more than 70% ESG funds across all asset classes generated greater returns than their counterparts through the first four months of 2020. According to S&P Global Market Intelligence, 14 out of 17 ESG-focused ETFs and funds surpassed the S&P 500 from Jan 1 to May 15 (per a CNBC article). Furthermore, Bank of America Merrill Lynch research report states that ESG stocks have outperformed the S&P 500 by five percentage points between Feb 19 and Mar 25, marking the sharpest period of index decline. Moreover, a Wall Road Journal evaluation of ESG fairness funds also found that around 150 of about 200 funds surpassed the common return of a fund’s broader class, per a Wall Street Journal report.
ESG ETFs to Gain
Below we discuss a few ETFs that seek to provide exposure to ESG investing:
iShares ESG MSCI USA ETF ESGU
The fund seeks similar risk and return to the MSCI USA Extended ESG Focus Index, while achieving more sustainable outcome. The fund provides exposure to higher-rated ESG companies, while accessing large and mid-cap U.S. stocks. The fund has 346 holdings with AUM of $7.47 billion. It charges 15 bps in fees (read: ETF Areas to Join the Thematic Investing Trend in 2H20).
Xtrackers MSCI USA ESG Leaders Equity ETF USSG
The fund tracks investment results that correspond generally to the performance of the MSCI USA ESG Leaders Index. Notably, the MSCI USA ESG Leaders Index provides exposure to companies with high ESG performance relative to their sector peers. The fund has 292 holdings, with AUM of $2.35 billion. The fund charges 10 bps in fees (read: Ride the Thematic Investing Trend With These ETFs).
Vanguard ESG U.S. Stock ETF ESGV
The fund tracks the performance of the FTSE US All Cap Choice Index comprising large, mid, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling and nuclear power industries. It also doesn’t consider companies which do not meet the U.N. global compact principles and diversity criteria. The fund has 1479 holdings, with AUM of $1.67 billion. It charges 12 bps in fees (read: Here's Why ESG ETFs Are Hot Amid Pandemic).
Nuveen ESG Large-Cap Growth ETF NULG
The underlying TIAA ESG USA Large-Cap Growth Index comprises large-cap equity securities and meets ESG criteria and exhibits overall growth style characteristics based on long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend and long-term historical sales per share growth trend. The fund has 79 holdings, with AUM of $313.7 million. It charges 35 bps in fees.
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Nuveen ESG LargeCap Growth ETF (NULG): ETF Research Reports
iShares ESG MSCI USA ETF (ESGU): ETF Research Reports
Vanguard ESG U.S. Stock ETF (ESGV): ETF Research Reports
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
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