FINSUM + Magnifi: Top Asset Manager Makes All Funds ESG
(February 2021)
ESG has been getting more and more mainstream, and yesterday it likely took the final hurdle to major acceptance. A top asset manager with almost $1 tn in AUM announced that from here forward, all its new funds would be ESG. The manager is DWS group, which is majority owned by Deutsche Bank. According to DWS, “Sustainability is more than a corporate topic, it’s a society topic and an industry topic”. The move follows UBS’ recommendation last year that investors choose sustainable investing over traditional investing. However, according to some US financial advisors, these kind of moves will come slowly in the US. “There is too much assets tied up in old money and not enough advisor support,” says Jeff Glitterman of Glitterman Wealth Management.
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FINSUM + Magnifi: Vanguard Launches New Bond ETF with Custom ESG Strategy
(September 2020)
ESG has been flourishing since COVID began. ESG and COVID era investing naturally align—at their core, both are about risk mitigation. However, the challenge is figuring out the best way to invest in ESG. The whole area is vague. There are many funds to choose from, but the way fund providers separate good companies from bad is complicated and often opaque. To this environment, enter a new fund from Vanguard, the Vanguard ESG U.S. Corporate Bond ETF. The fund covers the broad corporate bond space with an ESG lens, but does so with a very well-defined methodology. The fund is using an ESG index specially developed by MSCI and Bloomberg. The index uses a “exclusionary screening process” which filters out companies involved in various vice industries, gas, GMOs, oil, thermal coal, firearms, and anything nuclear-related.
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FINSUM + Magnifi: DOL Plan to Ban ESG from 401(k)s Gets Attacked by Industry
(September 2020)
Anyone who invests significantly in ESG will already be aware: the DOL is going after the ESG sector and has a proposal making progress that would bar the inclusion of ESG funds in 401(k)s. The push—which the DOL seems very committed to—comes despite the fact that almost everyone in the wealth and asset management spaces says there is no real problem. The DOL is making the rule because it fears that ESG funds could be against a client’s long-term economic interests. However, according to BlackRock, over the last ten years “94% of sustainable indexes outperformed traditional indexes”. BlackRock and Fidelity have both come out publicly against the rule, with the latter publishing an 11-page letter to the DOL which said the rule was not “well grounded or supported by much of the emerging data”.
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FINSUM + Magnifi: How to Separate Good ESG Investments from Bad Ones
(September 2020)
Anyone who has invested in ESG will be well aware that under the surface, things can get quite murky. Most ESG funds—especially ETFs—hold stocks that many would never consider to be “green”. For example, oil and utilities companies. Therefore, it is important to understand that ESG ratings vary widely and are provided by a number of companies. This means that even funds who don’t advertise as being ESG-focused often have high scores (for example, see XLU, the popular utilities sector SPDR). Generally, there are three types of ESG funds: ESG-focused funds which use ESG as part of their security selection, impact funds that invest with a certain ESG goal in mind, and ESG sector funds. The first group is the largest by far.
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FINSUM + Magnifi: Why the Pandemic Means You Should Invest in ESG
(September 2020)
Any advisor who has been paying any attention to ESG lately will know the sector has been doing well. This is true not only on a returns basis, but also in terms of AUM growth. While many articles have covered this, one thing that is rarely mentioned is the real reason why. The true crux of the rise of ESG during COVID is the fact that at its heart, ESG is about risk mitigation. In particular, protection from environment, social, and governance risks. Therefore, the underlying mindset of ESG is closely aligned with the conservative and protectionist pandemic-era mindset that has prevailed over the last six months.
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