Socially responsible investments that track factors such as environmental, social and governance principles have gained a lot of attention lately, and the category may start to compete with other traditional investments.
IShares Americas director at BlackRock, Armando Senra, has argued that ESG investments could reach $ 1 trillion in assets by 2030, CNBC reports.
The ESG fund category has only just started to gain momentum over the past year, as “we’re only at the very beginning” of what could be a ten-year growth story, said Senra at CNBC.
The ESG category is already on pace with a record year of entries, bringing in over $ 21 billion in the first quarter of 2021 alone. To put that into perspective, ESG funds have attracted over $ 51 billion in sales. ‘net inflows for all of 2020, reported $ 21.4 billion in 2019 and registered around $ 5.4 billion inflows in 2018.
Senra attributed the growing interest in ESG investing to larger asset managers and model portfolio managers who are implementing sustainable investment strategies into their investment models more effectively.
“ESG investing has gone from being a satellite or marginal type of investment strategy to a lot more of a core strategy,†Salvatore Bruno, chief investment officer of IndexIQ, told CNBC.
However, as more and more fund managers come up with socially responsible or ESG strategies, it is up to investors to do their due diligence before getting started. For example, IndexIQ’s ESG strategy avoids exposure to Netflix due to energy consumption issues.
“One of the main reasons they are not part of our strategy is that they have a significant negative impact on the environment due to the high electricity consumption of their data service,†said Bruno, adding that Amazon had not made the reduction due either. to some of its issues with employees which come under the social aspect of ESG.
Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, warned that while issuers have their favorite ways of defining ESG, the key for investors is knowing what they own.
The same index providers that make the definitions are the ones that “rank growth or value companies,†Rosenbluth told CNBC.
“Often they will agree with each other, but often they will not,†he said. “You have to understand what’s in the wallet. If you want a commodity closely aligned with the larger market and you are convinced that the five biggest stocks are the same five biggest stocks in the S&P 500, but there are a lot of stocks that aren’t. more declining, so there are some great products, â€he added.
For more news, information and strategy, visit the ESG channel.