As an investing style, ESG has been the target of ample criticism and plenty of negative press. However, that hasn’t diminished some investors’ enthusiasm for values-based investing.
That signals that there’s still a potentially expansive long-term audience for exchange traded funds such as the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG). The two Invesco ETFs could be appealing to market participants, including those in younger demographics, that want exposure to ESG and sustainable investments. QQMG and QQJG, while featuring “ESG” in their names, aren’t “over-the-top” in terms of how they advertise ESG.
That’s a relevant, though underappreciated, point in the current environment. Some studies indicate while market participants remain committed to sustainability, those aren’t the terms they use when discuss those investment styles.
QQJG, QQMG Pertinent as Investors Hone ESG Views
Morningstar recently used artificial intelligence (AI) to examine “26,784 posts and comments from 2015-22 related to ESG from finance-related subreddits.” In what could be a longer-ranging positive for ETFs such as QQJG and QQMG, the research firm discovered that investors frequently don’t use that term. They do use terms such as “climate change” and others pertaining to social issues.
Therefore, retail investors are willing to embrace the strategy, but they don’t necessarily need to hear that term. Many on the more socially aware and sophisticated sides of the ledger want to know that the companies prioritize issues such as climate change and social awareness, among others.
That speaks to the utility of broad-based approaches such as QQJG and QQMG because both ETFs are home to a variety of companies that check those boxes.
“ESG factors were incorporated into broader conversations related to investing, such as considering the viability of an industry given ESG concerns. This again points to a divergence between investors and industry—investors are approaching ESG as part of the puzzle, not the whole puzzle itself,” notes Morningstar.
Another positive element in the Morningstar research as it pertains to ETFs such as QQJG and QQMG is that many investors don’t have overtly positive or negative opinions regarding environmental, social, and governance investing. In this case, neutral could be favorable for ESG ETF issuers following a couple of years of largely negative headlines.
“This neutrality was reflected throughout time; even after the popularity of the topic online exploded in 2020, the conversations largely remained neutral. This, too, indicates industry conversations differ from investors’ conversations,” concludes Morningstar.
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