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ESG ETFs Appear Unscathed by the Coronavirus Carnage

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  • ^GSPC

Environmental, social and governance (“ESG”) investing has remained a hot favorite among investors since the pre-outbreak period. Wall Street just recorded the worst quarter since the fourth quarter of 2008. But ESG ETFs appeared somewhat resilient to the acute selloffs.

iShares ESG MSCI USA Leaders ETF SUSL lost 18.9% this year versus 23.5% loss in the S&P 500 (as of Apr 1, 2020). In the first quarter, 59% of U.S. ESG ETFs beat the S&P 500 Index, while 60% of European ESG ETFs outperformed the MSCI Europe Index, per Bloomberg (read: ESG is Top Global Strategy: 5 ETFs Getting Investors Love).

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.

Since the last few months, 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.”  Not only equity ESG funds, investors are eyeing green bonds as well.

Below we highlight a few ESG ETFs that have seen assets surge considerably in the past month. Data are as per etf.com (read: 6 ESG ETFs Close to or Above the $1B Asset Mark).

Global X Conscious Companies ETF KRMA — Up 128.98% 

The fund is designed to provide investors an opportunity to invest in well-managed companies that achieve financial performance in a sustainable and responsible manner and exhibit positive ESG characteristics. Many stocks that have come across winners in the coronavirus crisis have presence in the fund. Its top holdings are Regeneron, Clorox, Biogen, Newmont, Netflix and Amazon. The $199.4-million fund currently charges 43 bps in fees.

SP Funds S&P 500 Sharia Industry Exclusions ETF SPUS — Up 29.86% 

The underlying S&P 500 Sharia Industry Exclusions Index comprises the constituents of the S&P 500 Sharia Index other than those from the following sub-industries: Aerospace & Defense, Financial Exchanges & Data, and Data Processing & Outsourced Services..

Nuveen ESG Mid-Cap Growth ETF NUMG — Up 26.76% 

The underlying TIAA ESG USA Mid-Cap Growth Index comprises equity securities issued by mid-capitalization companies listed on U.S. exchanges. It uses a rules-based methodology that provides investment exposure that generally replicates that of mid-cap growth benchmarks through a portfolio of securities that adhere to predetermined ESG, controversial business involvement and low-carbon screening criteria. The 73-holding fund has an asset base of $71.6 million. No stock accounts for more than 2.84% of the fund.

SP Funds S&P 500 Sharia Industry Exclusions ETF SPUS — Up 21.32% 

The underlying Dow Jones Sukuk Total Return (ex-Reinvestment) Index seeks to track the performance of global Islamic fixed income securities, also known as sukuk. The index measures an investment (excluding reinvestment) in U.S. dollar-denominated, investment-grade sukuk that have been screened for Shariah compliance.

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Global X Conscious Companies ETF (KRMA): ETF Research Reports
 
Nuveen ESG Mid-Cap Growth ETF (NUMG): ETF Research Reports
 
SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS): ETF Research Reports
 
iShares ESG MSCI USA Leaders ETF (SUSL): ETF Research Reports
 
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Zacks Investment Research
 
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