Inflows confirm that it’s been a banner year for adoption of environmental, social, and governance (ESG) exchange traded funds.
A rising tide can lift all sails, and ongoing enthusiasm for ESG ETFs could be beneficial for the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST). As it is, JUST is already benefiting investors, as highlighted by a year-to-date advantage over the widely followed Russell 1000 Index. That’s something to consider because the future is bright for ESG ETFs, including JUST.
“And the trend looks poised to continue, especially when you consider the attitudes and preferences of younger investors. A 2017 Morgan Stanley study showed that millennials are nearly twice as likely as the overall investor population to invest in companies and funds that support their environmental or social values,” writes Marika Christopher, Janus Henderson director of product strategy & ESG. “Considering the fact that these investors are on track to inherit $30 trillion in wealth over the next 20 years, the further growth of ESG assets seems all but inevitable.”
What makes JUST all the more relevant at a time when more investors are gravitating to ESG ETFs is the way the fund stands out in this category. Many traditional ESG funds simply employ basic exclusionary tactics. However, JUST goes deeper. The fund’s underlying index scans 145,000 data points across 88 unique metrics, providing exceptional depth in a category in need of it.
The JUST methodology is relevant for another reason: It steers investors clear of companies that could be environmental offenders. Those scenarios often lead to bad press and sinking share prices.
“The interest is well founded: We’ve seen a number of companies with a record of environmental harms, poor working conditions and employee policies, and unethical management practices face extraordinary fines, immense public backlash, and even closure. These are certainly not the type of firms a prudent investment analyst would recommend holding over the long term,” adds Christopher.
Another reason that JUST merits consideration is financial performance. Companies that score well on ESG outperform their lagging ESG counterparts on a variety of financial metrics. A study finalized earlier this year by the NYU Stern Center for Sustainable Business and Rockefeller Asset Management indicates as much.
“The researchers found a positive relationship between ESG and financial performance in 58% of the corporate studies, with 13% showing neutral impact, 21% showing mixed results, and only 8% showing a negative relationship. In the investment-focused studies, 59% showed similar or better performance relative to conventional investment approaches while only 14% found negative results,” according to Christopher.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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