Sector Research: Listed Environmental Investments: An Introduction

Sector Research: Listed Environmental Investments: An Introduction

By Otis Harrison, CFA.

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ESG Funds Introduction:

When it comes to investing, the notion that you can make money in the market and feel good about your investments is a compelling one. It is responsible for a huge trend in global markets. Environmental, Social and Governance (ESG) funds saw net inflows of 20.6 billion USD in 2019, four times that of 2018. By the end of 2019, this record inflow brought total ESG fund assets to 137.3 billion USD. This figure represents less than 1% of the wider 20.7 trillion USD universe of mutual and exchange-traded funds (ETFs) in the US. However, the sector’s double digit growth has not been missed by fund providers looking for their piece of the pie.

There is a large range of fund investment strategies that can be marketed as ESG. However, the degree of impact and the method for measuring it can vary dramatically. Screening investments for inclusion is mainly done in two ways.

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Topics Covered:

  • ESG Market Performance
  • ESG Out Performance
    • Long term consistent out performance
  • ESG ETFs
  • Climate Change ETFs
    • Green ETF story less rosy than ESG as a whole
  • ESG ETFs
  • Environmental Sector ETFs
  • Investable Climate Change Themes
    • Energy Efficiency
      • Industrial efficiency
      • Investment opportunities
    • Sustainable Transport
      • Industrial efficiency
      • Investment opportunities
    • Environmental Resources
      • Industrial efficiency
      • Investment opportunities
    • Clean Energy
      • Industrial efficiency
      • Investment opportunities
  • Thematic Environmental ETFs
  • Green Bond ETFs
  • Building a Climate Change Portfolio
  • References
  • Disclaimer

Conclusion:

As we continue through this century, climate change is certain to affect humanity. In addition, it will also affect the infrastructure that enables modern life. It will create winners that will create and erode returns. Owning leaders in environmental sustainability with strong fundamental characteristics, that operate in growth areas of the market while serving real climate change needs will be crucial to long-term investment performance.

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