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ETFs Matter in Future of ESG Investing

The concepts of ESG and sustainable investing are rapidly evolving. This is prompting many advisors and investors to ponder what the future holds for these investing styles.

Only time will bring clarity on that front. But ETFs are an ideal mousetraps for investors looking to tap into ESG principles and access sustainability benefits.

Momentum for those investing styles along with more regulatory clarity and dampening of greenwashing could drive long-term adoption of ETFs, including the Calvert US Select Equity ETF (CVSE), Calvert Ultra-Short Investment Grade ETF (CVSB) and the Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI), among others.

Urgency Could Spur ESG ETF Adoption

One of the primary reasons future adoption of ESG and sustainable ETFs could surge is urgency. Many corporations and governments recognize the need to fight climate change. They’re also recognizing the need to do so while making strides regarding diversity and inclusion.

But the urgency for even more capital at scale to finance innovative sustainability solutions is clear, as companies race toward a net-zero energy transition and demand grows to finance additional and interrelated issues important to global economies, such as gender equity or ocean conservation,” noted Morgan Stanley’s Jessica Alsford.

There’s another harbinger of positivity to come for ETFs such as CDEI, CVSB, and CVSE. That is the fact that younger investors are increasingly prioritizing ESG and values-based investing. Millennials are earning more and inherent wealth from their parents. And more Gen-Zers are entering the workforce. That could drive more assets into the ESG ETF category. Data confirms the interest is already there.

“Demand from Millennial investors—paired with new government incentives and regulations—will likely fuel the presence of sustainable investing in new asset classes and themes in the next 10 years. Essentially, all surveyed U.S. Millennials (99%) indicated they were interested in sustainable investing, according to a 2021 report from the Institute. If that demographic follows through on its intention to invest, there will likely be a greater breadth of solutions across the market,” adds Alsford.

In what could stir interest in ETFs such as CDEI and CVSE, younger investors are increasingly in ESG strategies that go beyond the “E.”

“Social issues should also continue to gain prominence on investor agendas, with growing attention to issues such as the privacy and ethical implications of artificial intelligence; racial, gender and LGBTQ+ diversity; access to affordable housing, healthcare and education; and the disproportionate social implications of physical climate events and the disproportionate social implications of physical climate events,” concluded Alsford.

For more news, information, and analysis, visit the Responsible Investing Channel.

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