Environmental, social, and governance (ESG) investing has taken some lumps dating back to last year. There was the obvious lethargy of the related strategies as growth stocks — lynchpins in many funds — as interest rates spike.
Then there was the political element, which is still lingering. That has prompted some so-called experts to say ESG is in decline, or more ominously, dying. That’s not the case and in what could be good news for the strategy’s exchange traded funds, such as the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG), some experts argue that ESG investing is evolving and maturing.
In fact, the long-term outlook for QQMG and QQJG is arguably bright, because sustainability and social issues are increasingly centerpieces of improved corporate governance. Likewise, the points that climate change and diversity, equity, and inclusion, among other issues, are gaining more mainstream traction bodes well for ESG as an investing style.
Positive Factors Abound for ESG Investing
Data confirm that ESG fund launches slowed last year and while critics may latch onto that point as a form of “victory,” the reality is the case for ESG is as strong as ever. Consider the expected long-term expenditures that are necessary to power the renewable energy transition.
“McKinsey puts the need at a net increase of $3.5 trillion annually; the trends are promising and meaningful to meet the need for innovation in everything from battery storage to next generation nuclear to decarbonizing the use of fossil fuels,” reported Judy Samuelson for Quartz.
Another important point to remember, broadly speaking, is that ESG investing in the ETF wrapper is still a young concept. As such, some market participants aren’t aware of the fact that they can do right for the world at large and for their portfolios by considering funds such as QQJG and QQMG.
That’s not anti-ESG commentary. Rather, it underscores the need for more ESG education. As more market participants realize they don’t have to sacrifice performance to do right, they might be more inclined to consider products such as QQMG and QQJG.
“It requires a steady hand and long-term vision. There are rewards for investing in companies with clear strategies and the operational chops to pursue carbon-reducing innovations and practices, or that have superior workforce practices,” according to Quartz.
Thing is, efforts such as those mentioned above take a while to materialize into stock price upside, indicating assets such as QQJG and QQMG should be approached with a long-term perspective.
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