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ESG ETFs Can Act as Core Portfolio Positions

This article was originally published on ETFTrends.com.

ETFs that track environmental, social and governance principles help people invest in what they believe in without sacrificing returns.

"We believe good environmental, social, and governance practices can be additive to performance," George R. Evans, Chief Investment Officer, Equities, Portfolio Manager, OppenheimerFunds, said in a note.

In the upcoming Disruptive ETF Virtual Summit, an online virtual conference hosted by ETF Trends on Thursday, Oct. 18, 2018, OppenheimerFunds will cover the topic of ESG or environmental, social and governance investing that targets investors who are guided by various principles and seek out companies that strive to do social good.

Evans argued that ESG factors have been and are important to the basic understanding of a business and can be additive to investment performance since ESG characteristics also matter in a very real economic sense. ESG miscues can even harm a company’s ability to create economic value.

"Increasingly, companies are realizing that it is in their business interests to perform well against ESG criteria," Evans said.

"They can interact with one another, often positively, sometimes negatively, and have important implications for the sustainability and durability of a company’s business economics," he added.

ESG investments are also ones with a long-term outlook. Evans found that businesses that are capable of long-term value creation for its shareholders must excel at ESG.

"In our experience, long-term value creation is not possible for companies entangled with ESG controversies," Evans added.

For example, the Deepwater Horizon explosion and oil spill in the Gulf of Mexico in 2010 dragged British Petroleum shares prices down by 50%. The total cost to BP from fines and cleanup costs exceeded $50 billion. So ESG is a very real topic with very real economic consequences if things go wrong, Evans warned.

ESG ETF Options

Investors who believe in the positive attributes of a socially responsible ETF strategy may consider options like the Oppenheimer ESG Revenue ETF (ESGL) and Oppenheimer Global ESG Revenue ETF (ESGF) .

ESGL targets broad U.S. large-caps through the S&P 500 but screens through Sustainalyics’ proprietary scoring system that focuses on those with positive ESG attributes and employs a revenue-weighted methodology.

ESGF, on the other hand, takes a global approach. The ETF tries to outperform the MSCI All Country World Index with strong ESG practices and re-weights companies based on revenue earned. MSCI ESG Research utilizes a proprietary ESG scoring system and screens companies based on Sharpe Ratio, a measure of risk-adjusted performance.

To get more insight on disruptive ETFs, sign up for the Disruptive ETF Virtual Summit set to take place this fall.