Environmental, social and governance (ESG) investing has been gaining precedence in the ETF industry. Issuers are increasingly coming up with products, responding to growing investor demand. About 30% of respondents expect to invest between 11% and 20% of their portfolio in ESG ETFs within the next five years, a Brown Brothers Harriman’s ETF survey found.
About 95% of millennials intend to be socially responsible while making investment decisions. Meanwhile, around 67% of millennials are “taking part in at least one sustainable investing activity.” No wonder, issuers are rolling out products specifically targeting the ESG criteria.
Per Pimco, reasons like growing public-private partnerships, the efficacy of incorporating good governance, changing climate, shifting source of energy, rising life expectancy and changing demographics are boosting the demand for ESG investing.
U.S. ESG ETFs raked in $8 billion of inflows in 2019, almost double the amount from the prior year, according to data compiled by Bloomberg. The strategy is more popular in Europe. BofA analysts estimate that investment into European equities by ESG funds will grow by as much as 1.1 trillion euros ($1.2 trillion) by 2030.
Not only equity ESG funds, investors are eyeing green bonds as well. In fact, ESG equity funds were the second-most popular asset class after U.S. government bonds in 2019, with 28% of asset inflows, per BNP Paribas (PA:BNPP), quoted on Bloomberg (read: Are ESG ETFs the Right Choice for 2020?).
Against this backdrop, we highlight a few ESG ETFs that have been investors’ favorite in the past month (per etf.com).
PIMCO Enhanced Short Maturity Active ESG Exchange-Traded Fund EMNT: AUM Up 206.3% Past Month, Price Up 1.6%
The PIMCO Enhanced Short Maturity Active ESG ETF seeks maximum current income, consistent with preservation of capital and daily liquidity, while incorporating ESG investment strategy.
Global X Founder-Run Companies ETF BOSS: AUM Up 169.3% Past Month, Price Up 2.7%
The underlying Index seeks to measure the performance primarily of U.S. large-Cap and mid-Cap companies currently led by a CEO who founded the company.
iShares Trust - iShares ESG MSCI USA ETF ESGU: AUM Up 142.6% Past Month, Price Up 2.3%
The underlying MSCI USA Extended ESG Focus Index comprises U.S. companies that have positive environmental, social and governance characteristics, while exhibiting risk and return characteristics similar to those of the parent index (read: Best ETFs to Combat Climate Change).
iShares ESG MSCI EM ETF ESGE: AUM Up 135.8% Past Month, Price Down 3.7%
The underlying MSCI Emerging Markets Extended ESG Focus Index comprises large and mid-capitalization emerging market equities that have positive environmental, social and governance characteristics (read: Is Coronavirus an "Opportunity" for Emerging Markets ETFs?).
PIMCO RAFI ESG U.S. ETF RAFE: AUM Up 117.9% Past Month, Price Up 0.1%
The underlying RAFI ESG US Index uses a rules-based approach within publicly traded U.S. equities to create an integrated ESG strategy. The index focuses on companies that deal with various ESG themes and excludes companies with a major involvement in industries such as tobacco, gaming, weapons and fossil fuels.
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Zacks Investment Research