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Financial Advisors Could Fuel Growth in ESG ETF Theme

This article was originally published on ETFTrends.com.

The development of environmental, social and governance data disclosures from corporations has helped fuel the expansion of the ESG investment theme. As more investors look to socially responsible investments, ESG-focused exchange traded funds may also attract greater attention.

"Asset management firms with an eye toward the future are increasingly recognizing the sustainable investing trend, grappling with its complexities, and determining how and where to implement it in portfolios," OppenheimerFunds' Aniket Shah and Sharon French said in a research 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 screens for various socially conscientious principles and seek out companies that strive to do social good.

About $8.7 trillion, or 21% of all managed assets in the United States, has some element of ESG consideration as part of the process after tripling between 2012 and 2016. In comparison, in Europe, where over 50% of all managed assets have a sustainable investing attribute, the United States has more room to run.

Institutional investors have been a big driver behind the growth in sustainable investing. In addition, individual investors, especially Millennials and women, are becoming more attracted to the availability and potential benefits of the ESG investment styles. The potential shift in investment demand represents an opportunity for financial advisors with an understanding of the space to provide guidance to clients looking to align portfolios more closely with their individual core values.

As a way to access the ESG investment landscape, 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.

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