Exchange Traded Funds
An exchange-traded fund (ETF) is a basket of securities you buy or sell through a brokerage firm on a stock exchange. ETFs are offered on virtually all asset classes ranging from traditional investments to alternative assets like commodities or currencies. There are currently more than 1,800 of them – and you can’t judge a book by its’ cover.
ESG ETF’s grew in popularity by 50% in 2019.
As part of the European Union and the United States Sustainable Finance package, the Benchmark Regulation requires benchmark administrators to publish specified ESG metrics for all regulated ESG indexes and to make certain ESG related disclosures in the methodologies for all regulated indexes.
Top ESG rating and sustainability indexes are also found with S&P Dow Jones Indices, Sustainalytics, MSCI, Euronext Vigeo-Eiris, Robecosam and Bloomberg ESG.
Dow Jones ESG Indexes. On this site, extensive searches can be done, worldwide, and every index is clickable, with an additional “Fact Sheet” and “Methodology” data.
There is also www.vigeo-eiris.com
Active and Passive Investing
Active investing requires a hands-on approach, typically by a portfolio manager or other so-called active, researching participant. Passive investing involves less buying and selling and often results in investors buying index funds or other mutual funds.
Should you go with an active manager or an index fund? No matter how you choose to invest, someone in the process has to be active.
As the money invested in sustainable strategies rises, the stakes get higher, and more investors need to understand which approach works best for their goals.
One problem will arise when you, having fulfilled all of your ESG requirements, might wind up with a gun manufacturer in your portfolio.
“If you are concerned about gun violence and are a fund investor, you may want to know whether you are invested in gun stocks. Or not: It’s a reasonable position to be concerned about the issue and want to see something done to address it, but not to be worried about guns in the context of your investments.” https://medium.com/
Impact Investments
Also known as ESG investing, these are investments made with the intention to generate positive, measurable social and environmental impact along with a financial return.
With impact investors, otherwise potentially profitable investment sectors like oil, casinos, tobacco, alcohol or military and defence are generally sectors that are avoided, as they are largely viewed unfavourably by sustainable investors.
According to investopedia.com, there are currently 33 ETFs which have an ESG score of 7.5 (out of a possible 10) or higher.
Morningstar.com also has an interesting list of high performers.
However, will companies that operate as fully vetted socially responsible corporate partners to their communities generate greater investment returns than companies who don’t measure up in the eyes of impact investors?
The bottom line is, only if the impact funds are sufficiently diverse, which again may mean a compromise in your investment purity.
One sometimes has to make a choice between making a profit or sticking to their ethical ideals.
