ETFs for ESG: Sustainable investing is here to stay
March 12, 2021
Megatrend of ESG
Environmental, Social and Governance (ESG) Investing has been rapidly advancing in the last decade, with the growing concern over climate change. Sustainable investing is an area that appears to have gained greater momentum since the COVID-19 pandemic with investors now looking to invest in companies whose values and goals they identify with. In this article, we will discuss the ESG investing market trend and the performance of ESG ETFs.
ESG Investing in Pandemic
With the fact that people have been very reflective during the pandemic. They start to rethink different aspects of their lives – including their investments – line up with their values. ESG investments may be one of the answers for which they are searching.The pandemic acted as a catalyst for increased flows into ESG investments in 2020, it is expected that global action on environmental and social challenges will continue to spark flows in the coming years. Momentum will continue to build across the globe and we look forward to seeing how investors will respond to businesses and governments that hold themselves accountable to multiple sets of stakeholders, including shareholders, employees, customers, suppliers, affected communities, and local and global environments.
AUM Growth of ESG Investing
Source: GSIA, Bloomberg Intelligence[/caption]The recent momentum and capital inflow around the globe are remarkable. According to Bloomberg, the Global ESG assets are rapidly growing and estimated to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management (AUM). Assets in ESG ETFs more than doubled to $80 billion over the past year and around another 30 ESG-themed funds were launched globally according to the 2020 J.P. Morgan Global ETF Handbook.Apart from the broad market, investors at Kristal.AI also had a massive gain with ESG ETFs and they continue to explode. From Jan 2020 to Apr 2021, while the number of clients investing in ESG ETFs recorded a staggering growth of 19X, the total assets under management (AUM) have also sharply increased by 24X. ETFs such as First Trust Green Energy ETF (QCLN), Invesco Solar ETF (TAN), Invesco WilderHill Clean Energy ETF (PBW) are some of our top picks on the focus list.
Performance of ESG ETFs
#ETFExpectedReturnStandardDeviationSharpe Ratio1First Trust Green Energy ETF (QCLN)128.22%48.95%1.7382Invesco Solar ETF (TAN)140.26%53.54%1.6923Invesco WilderHill Clean Energy ETF (PBW)135.70%57.92%1.5294State Street S&P 500 ETF (SPY)26.48%22.55%1.037Source: PortfoliovisualizerThe ETF approach provides diversification across various industries, allowing investors to gain exposure without taking on the level of risk inherent in investing in a specific company. QCLN, TAN, PBW had the best 1-year trailing total returns for ESG ETFs on Kristal.AI from Jan 2020 to Apr 2021. The volatility (standard deviation) of the ESG ETFs are compensated by the enormous 3-digit expected return, implying a high risk-adjusted return (Sharpe Ratio) compared to the benchmark SPY.
ESG Trends to Watch in 2021
With this growing global urgency around climate, conversations about energy transition will become increasingly nuanced and the nature of transition conversations will shift from climate mitigation to climate resilience. Apart from the environmental concerns, social and governance issues will gain traction with investors and in global policy discussions. Below is the ESG trend to watch in 2021:
Race to net-zero carbon emission
Threats to Nature and Biodiversity
Integrity and Diversity
Corporate ESG Reporting
Gender, Social, Racial Equality
Want to invest in ESG ETFs?
Get Started with Kristal.AI. Sign up or schedule a call with us if you have any inquiries, our investment professionals will get in touch with you soon.
This website/application including the ‘KristalFlex’ platform is owned, operated and maintained by Globalise Inc., a company incorporated in United States of America (the “Company”). The information placed on the platform is for informational purposes only and does not constitute as an offer to sell or buy a security. The Company reserves the right to make modifications and alterations to the content available on the platform. The Company is neither registered as an investment advisor nor as a broker dealer. The KristalFlex platform offers users access to investments in global securities through multiple stock exchanges and such other services as may be provided either directly or through its affiliates and partners. Price and availability of products and services offered on the platform are subject to change without prior notice. The Company will not be liable for any lack of availability of products and services you may order through the platform.
Do note that investment in securities market are subject to market risks. The valuation of securities may increase or decrease depending on various factors affecting the securities market. The services being provided by through the KristalFlex platform is not professional investment advice. All the recommended list of offshore funds, portfolios etc. being provided through the platform shall be/are in the form of generic research reports on offshore securities and shall be accessible by all authorised / subscribed users of these services at the same time.
The platform and the services thereunder are provided on an “as is” basis. The Company makes no warranties or representations, express or implied, on products offered through the platform. It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services. The Company is not responsible for any technical failure or malfunctioning of the software or delays of any kind and is also not responsible for non-receipt of any e-mails. You shall bear all responsibility of keeping the password secure and shall be solely responsible for the loss or misuse of the password.
Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with the Company or its affiliates unless expressly stated otherwise. Any such information and/or products have not necessarily been reviewed by the Company and are provided or maintained by third parties over whom the Company exercises no control. Certain hyperlinks or referenced websites on the platform, if any, are for your convenience and forwards you to third parties’ websites. The Company will, under no circumstance, be responsible for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party websites. The Company does not endorse in anyway any advertisers/ contents of advertisers on its webpages or the KristalFlex platform.
We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
This is offered only to Accredited and Institutional Investors as defined under the Securities and Futures Act, Chapter 289 of Singapore (“Act”), which broadly comprises of regulated financial Institutions, large corporates, high net worth individuals and sophisticated investors.
An Accredited Investor is an individual
Whose net personal assets exceed in value SGD 2 million (or it’s equivalent in a foreign currency) with value of his/her primary residence capped at SGD 1 million, or
Whose financial assets (net of any related liabilities) exceed in value SGD 1 million (or it’s equivalent in a foreign currency), or
Whose income in the preceding 12 months is not less than SGD 300,000 (or it’s equivalent in a foreign currency)
I agree to opt-in as Accredited Investor and will submit required documentation to confirm the same.