Environmental, social and governance (“ESG”) investing has remained a hot favorite among investors since the pre-outbreak period. Wall Street recorded the worst quarter to start 2020 since the fourth quarter of 2008. But ESG ETFs appeared somewhat resilient to acute selloffs in Q1 (read:
ESG ETFs Appear Unscathed by the Coronavirus Carnage).
ESG ETFs amassed more than $8 billion in 2019,
four times more than the previous year, per Bloomberg. Net inflows to ESG ETFs in the first three months of 2020 totaled about 6.7 billion. At the end of March, which was the worst month for Wall Street since October 2008, total assets of ESG ETFs were $19.1 billion, down from the peak of $20.8 billion in February but still higher than any point in 2019, noted Bloomberg. The trend hints at a rosier period for ESG ETFs ahead.
The S&P 500, the Russell 2000 and the Nasdaq have gained about 5.3%, 6.7% and 13.1% in the past month. However, several ESG ETFs outperformed the S&P 500 past month and some have even returned close to Nasdaq — the hottest trade of this year. Let’s have a look how this became possible.
Inside the Outperformance Amid Covid-19
Amid Covid-19, there has been a surge in interest in investing in companies that have smartly deployed their capital to confront climate change, “raise standards of corporate governance and improve human rights”, per a source called moneyobserver.com.
Hortense Bioy, Morningstar’s director of passive strategies and sustainability research for Europe, indicated that “companies with higher ESG scores tend to be of higher quality, experience lower volatility and be relatively large. This bodes well for the potential of ESG strategies in a downturn,” as quoted on moneyobserver.com.
The Bloomberg Law analysts are of the opinion that though risk considerations of a pandemic are not exactly the same as conventional ESG analyses, they are equivalent. The latest trend of working from home policies — leaves an impact on that company’s ESG performance in the ‘Social’ context. Other factors like “workplace safety, data privacy, job security, and community impact” are also making ESG investing more meaningful amid the pandemic, notified Bloomberg. Most ESG ETFs Are Tech-Heavy
Last but not the least, technology and healthcare appear to be two of the best-positioned sectors amid the coronavirus outbreak. While this medical emergency bolstered the need for treatments and vaccines, prolonged lockdowns globally made technology a crucial thing for operations in most cases.
The year 2020 has so far been marked with tech rally. Since most ESG ETFs are tech-heavy, the rally behind the socially responsible funds are self-explanatory (read:
Buy 5 Solid Tech ETFs At Least 10% Away From 52-Week High). ETFs in Focus
Below we highlight a few ESG ETFs that remained solid in the past month.
Nuveen ESG Mid-Cap Growth ETF ( NUMG Quick Quote NUMG - Free Report) – Up 14.9%
The fund invests 26.1% in Information technology, followed by 21.9% in healthcare.
SPDR S&P Kensho Clean Power ETF ( CNRG Quick Quote CNRG - Free Report) – Up 10.2%
Electrical Components & Equipment take about 24% of the fund while semiconductor-related products occupy another 24%.
Vanguard ESG U.S. Stock ETF ( ESGV Quick Quote ESGV - Free Report) – Up 7.5%
Technology takes 29% of the fund, followed by financials (17.7%), healthcare (15.6%) and consumer services (14.7%). In fact, FAAMGs take the top five positions in the fund.
iShares MSCI KLD 400 Social ETF ( DSI Quick Quote DSI - Free Report) – Up 6.3%
Technology occupies the 30.8% of the fund, followed by communications (13.68%) and healthcare (11.37%).
iShares ESG MSCI U.S.A. ETF ( ESGU Quick Quote ESGU - Free Report) – Up 6.0%
Information Technology takes the top spot with about 26.98% exposure, followed by Healthcare (14.96%).
iShares MSCI USA ESG Select ETF ( SUSA Quick Quote SUSA - Free Report) – Up 6.0%
Information Technology makes up about 28.9% of the fund, followed by 12.5% in Healthcare and 11.5% in industrials.
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