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Follow the Leaders in ESG With This Active ETF

Though time will continue to reveal its staying power, environmental, social, and governance (ESG) thus far has proven that it has its place in the investment community. When it comes to getting broad exposure that targets companies that are in the forefront of the ESG movement, consider the American Century Sustainable Growth ETF (ESGY).

ESGY is actively managed, giving investors peace of mind that the holdings in the fund are in the hands of professional portfolio managers. Per its fund description, ESGY seeks to provide a total return exceeding the benchmark over a market cycle by using a growth U.S. equity strategy that integrates ESG factors into the investment process.

Salient features of ESGY per the product website:

  • Invests in large-growth companies with improving business fundamentals and sustainable corporate behaviors.
  • Combines quantitative and fundamental research from multiple sources to ensure exposure to companies with more attractive ESG characteristics.
  • Uss a dynamic risk-management process focused on understanding and quantifying all portfolio risks.

ESG and Big Tech

Big tech has been at the forefront of large-cap companies that score high when it comes to ESG factors. As such, it’s no surprise that ESGY’s portfolio emphasizes most of its holdings on big tech names such as Microsoft, Apple, and Alphabet Inc. (28% of the fund’s weight is on information technology, as of August 31).

With such a heavy focus on big tech in 2023, this certainly provided upside when the sector staged a comeback after a bearish 2022. Moving forward, these same names should see continued growth given the rise of artificial intelligence, giving ESGY further upside.

This gives ESGY a dual purpose of obtaining growth in the big tech arena while getting the ESG exposure conscious investors want. Additionally, the AI growth exposure is harnessed in big tech names, so there’s also an element of large-cap safety versus a fund that targets small-cap growth names.

That upside is of particular importance regarding the current attitudes around ESG. While investors want to obtain that element of ESG exposure, the goal of profitability is still top-of-mind.

“And we’ve seen that with more North American funds that, yes, we want to do energy transition, we want to do ESG. But we actually need returns as well. And that has shifted — the attitude — there’s kind of a more realism,” said S&P Global’s Vice Chairman Dan Yergin.

For more news, information, and strategy, visit the Core Strategies Channel.

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