Despite some trying circumstances in 2022 — namely the resurgence of traditional energy stocks — environmental, social, and governance (ESG) investing remains popular with market participants.
That’s a positive, but it’s also becoming clear that seasoned ESG investors are demanding more than the blanket approaches that kickstarted this investing style. Some exchange traded funds stand ready to meet the demands of increasingly judicious ESG investors. That group includes the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST).
While JUST is well-suited for today’s more demanding ESG investors, that doesn’t mean the Goldman Sachs ETF is fresh off the ESG assembly line. Rather, the fund, which tracks the JUST U.S. Large Cap Diversified Index, is more than four years old. In other words, JUST has the right amount of seasoning and lack of one-size-fits-all approach that some critics view as a drag on ESG adoption.
JUST offers investors another advantage. By not being a run-of-the-mill ESG ETF, it avoids some of the controversies that are popping up as this fund category grows.
“This wide array of strategies has created confusion for investors and regulators in determining what counts as ESG and where investments fall on the sustainable continuum,” wrote Morningstar analyst Bryan Armour. “Claims of greenwashing—a term coined in the 1980s by environmentalist Jay Westerveld in an essay criticizing the ‘save the towel’ movement in hotels that ultimately just benefited hotels—are commonplace as organizations balance competing in a burgeoning industry with trying to define what counts as ESG.”
JUST stands apart from old guard counterparts because rather than focusing on excluding certain industries, the Goldman Sachs ETF emphasizes stakeholder capitalism. Although it’s not yet generating a huge amount of buzz, the concept of stakeholder capitalism is several decades old and is arguably more inclusive than standard ESG strategies.
With its stakeholder capitalism focus, JUST has the potential to deliver a matter mousetrap for investors prioritizing social and governance transformation. Translation: The $250 million JUST is a fresh approach to ESG, making it a relevant consideration today because the category could use some sprucing up beyond environmentally focused funds.
“There are challenges for investors in selecting a particular index and fund that fits their preferences and goals,” added Armour. “There is no one-size-fits-all in sustainable investing. Investor goals and preferences should dictate their investment choices.”
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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.
