ETFs
Remarkably strong outlook for ESG ETFs and funds
Many criticisms are aimed at environmental, social and governance (ESG) investing. Given this, it is not a stretch to assume that many are inferring that the strategy and associated ETFs are abandoned.
In reality, this is not the case. In fact, some experts believe the opposite is true and that the long-term prospects for adopting ESG strategies remain compelling. Some data points support these claims and that’s good news for ETFs such as the Invesco ESG Nasdaq 100 ETF (QQMG B+) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG C+).
Of note for advisors considering ETFs such as QQJG and QQMG is that while backlash and criticism targeting the strategy has intensified in recent years, data courtesy from the Institute for Energy Economics and Financial Analysis (IEEFA) indicate that funds continue to add assets while delivering strong performance.
Given the criticism, some end users may be inclined to assume that products such as QQJG and QQMG are losing relevance. In what could be considered a positive for Invesco funds, the opposite appears to be true.
“ESG continues to grow and remains relevant. The performance of ESG funds and ETFs has matched or exceeded traditional funds/ETFs over most periods, and regulators continue to focus on climate change risks and improving standards and disclosures for assess and mitigate these risks,” IEEFA noted.
Regional trends should also be observed. While ESG ETFs listed in the United States have experienced some capital outflows, this is not the case in Asia and Europe. Regulators in other parts of the world are making progress on clarity of ratings and ratings. If the United States follows suit, it is possible that more advisors and investors will renew their affinity for these funds.
Additionally, large market players are deploying ESG and sustainability strategies as part of their overall investment evaluation process. This could signal to advisors and retail investors that ESG investing has lasting validity.
“Large asset owners, such as sovereign wealth funds and pension funds, are increasingly integrating ESG and climate considerations into their investment processes and decision-making. They use the Paris Agreement to identify sustainability outcomes, prioritize collaborative commitments, provide regular reporting on climate and ESG issues, and implement and evaluate sustainable investments,” IEEFA concluded.