It might seem like a difficult task, but in a rapidly expanding landscape of environmental, social, and governance (ESG) exchange traded funds, it is possible for investors to identify products that stand out out from the pack and are easy to understand.
Not all ESG ETFs check both boxes, but the IQ Candriam ESG US Equity ETF (IQSU) is an example of a fund that accomplishes those objectives. The fund tracks the IQ Candriam ESG US Equity Index. Index provider Candriam designs the ESG criteria that serves as the foundation for IQSU’s broad-based large- and mid-cap exposure.
“The popularity of ESG has depended in part on a belief that it will play a positive role in making the world a better place. But critics say that such a warm-and-fuzzy feeling helps asset managers blur a key distinction — that ESG is mainly about using data to identify risks that might undermine investment performance, or to find opportunities to make money,” reported Saijel Kishan for Bloomberg.
The $389 million IQSU holds 401 stocks, confirming that it’s a credible alternative to broad-based funds that don’t emphasize ESG. Like many ESG ETFs, IQSU is overweight on technology stocks. The fund allocates 36.6% of its weight to that sector.
Couple that with a 15.7% allocation to healthcare stocks, and it’s clear that IQSU not only offers investors significant exposure to stocks with quality, but some that are now more attractively valued today than they have been in some time.
Overall, IQSU does feature exposure to all 11 GICS sectors, and like some of the more traditional offerings in this category, IQSU is light on energy, materials, and utilities names, as those three sectors combine for just 5.2% of the fund’s weight. That’s an indication that the ETF could be resilient if oil prices materially retreat.
With one of the lowest expense ratios in the category (0.09% per year), IQSU is poised to capitalize on investors’ increasing willingness to embrace ESG.
“Estimates vary depending on what people count as ESG. According to Bloomberg Intelligence, assets are set to climb to $50 trillion by 2025 from about $35 trillion now. They have grown from $30.7 trillion in 2018 and $22.8 trillion in 2016, according to the Global Sustainable Investment Association,” according to Bloomberg.
For more news, information, and strategy, visit the Dual Impact Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
