Something that’s often lost in all the political and regulatory criticism of ESG investing is the human side of this equation. Many market participants, particularly those on the retail side of the ledger, embrace ESG because it reflects personal values.
In fact, various data and studies confirm that values-based investing, including ESG, is highly important to younger investors. The human side of ESG asset allocation could be supportive of long-term growth for ETFs like the Invesco ESG Nasdaq 100 ETF (QQMG) and the Invesco ESG Nasdaq Next Gen 100 ETF (QQJG).
Those funds are increasingly relevant for ESG-inclined investors. That’s because many of those market participants stay abreast of current affairs. They know there’s been ample, vocal criticism of ESG. As such, those investors want to know that when they’re allocating their hard-earned capital to ESG, they’re getting the “real deal.”
With ESG Investing, Emotions Matter
Underscoring the longer-ranging opportunity set for QQMG and QQJG is the point that many investors embrace ESG because it makes them feel good. Sounds simple — and it is. But it’s also a credible factor supporting the growth of this investment style.
“When you use ESG investing to make your portfolio more ethical, you can feel good knowing that your financial resources are more likely to be helping companies that are working for the greater good,” according to Truist. “Beyond helping to improve the world’s future, there are tangible benefits to ESG investing—you don’t necessarily have to sacrifice high returns when investing according to your values.”
But simply because many ESG supporters enjoy feeling good about knowing their investments may be serving the greater good doesn’t imply they’ll accept subpar returns. Fortunately, studies confirm ESG funds offer comparable if not better long-term returns than non-ESG equivalents. Further enhancing the potential allure of ETFs such as QQMG and QQJG is the point that companies that score well on the basis of ESG often have less volatile stocks than ESG-lagging rivals. That phenomenon was confirmed in 2020 when the coronavirus wreaked havoc on financial markets.
“Plus, companies with strong ESG track records showed lower volatility than their non-ESG counterparts during the COVID-19 pandemic. So, if you had investments in sustainable companies in 2020, they probably fared a little better than more traditional investments,” concluded Truist.
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