Global Courant 2023-05-29 17:32:16
The push for environmental, social and governance considerations in investing has faced notable setbacks over the past year, but there are signs that the movement is evolving. Rising energy stocks in 2022 hurt the performance of many of the largest funds, and the political backlash has gained momentum as several states take steps to prevent sovereign wealth funds from investing in ESG products. Vivek Ramaswamy, co-founder of Strive Capital, used that firm’s anti-ESG approach to bid for the 2024 Republican presidential nomination. Some asset managers, most recently State Street, are experimenting with new voting tools by proxy after the lack of democratized voting was criticized by some on the right, and the backlash may already be impacting cash flows to some funds. According to AllianceBernstein, there were $12.1 billion in outflows from ESG funds in North America in the first quarter, though that was due to large outflows from a handful of funds. “This was mainly due to redemptions of a few large passive ESG funds (e.g. iShares ESG Aware MSCI USA ETF) as underlying investors rebalanced their factor exposure. It is clear that the political backlash against ESG also weighed on the sentiment and demand for ESG products in North America,” AllianceBernstein’s Zhihan Ma said in a note to clients in early May. divested and have underperformed the broader market over the past year But there was a stark contrast between the approach to ESG in the US and across the Atlantic, Bernstein said in the first quarter there was $2.7 billion in inflows into ESG funds in Western Europe. And the US investment industry is not giving up on the trend. “The ESG setback will continue. In some ways, the ESG backlash is here to stay. But ESG is also here to stay,” Aniket Shah, global head of ESG and Sustainability Strategy at Jefferies, said on a call with investors last week. While some fund complexes plow ahead with broad new ESG funds, such as Morgan’s Calvert suite Stanley, others are having success with smaller products that may not be explicitly marketed as ESG, but tick many of the same boxes those investors want.” Due to the recent political backlash and the massive amount of misinformation about ESG, it is likely the term ESG will continue to evolve — perhaps it could be broken down into subtopics or evolve into similar terms like ‘sustainable’ or ‘responsible’ investing,” Ma said in a note to clients in mid-May. Human Capital Factor A group of products that has seen some success are Harbor Capital’s Corporate Culture funds and research fund Irrational Capital. The Harbor Corporate Culture ETF (HAPI) has more than $200 million in assets and has so far outperformed the MSCI USA Large Cap Index and the S&P 500, although it has little trading volume. The new Harbor Corporate Culture Small Cap ETF (HAPS) has already brought more than $100 million in assets to market in less than two months. The funds are constructed using publicly available data and survey data to gauge employee sentiment and try to determine how happy they are with their company in a way that goes deeper than just their take-home pay. Kristof Gleich, president and chief investment officer at Harbor, said he sees Irrational Capital’s human capital research as a new type of investment driver. JPMorgan’s global quantitative and derivatives strategy team has said in research notes that the “Human Capital Factor” as defined by Irrational appears to lead to long-term outperformance. David van Adelsberg, co-founder of Irrational Capital, said the company is “dual” on ESG and that the fund’s main goal is to beat the market. “The way we position is that when companies do the right thing, it pays off. And we’ve proven it,” said Van Adelsberg. Gender equality There also appears to be new interest in funds focusing on gender equality issues, including the BNY Mellon Women’s Opportunities ETF (BKWO), which launched in May. That space already has a few similar funds, including the Impact Shares YWCA Women’s Empowerment ETF (WOMN), which debuted in 2018. with this product. It’s really helped us reach new donors and audiences…and engage with companies about these criteria and what they can do in the workforce,” said Jill O’Donovan, advisor to the WOMN Fund and former chief innovation officer at YWCA Metropolitan Chicago Green Investing And there are already many different theme funds for investors looking to bet on green energy, such as the $2 billion Invesco Solar ETF (TAN) An interesting wrinkle comes from activist fund Engine No. 1 The company, best known for successfully pushing to replace several board members at ExxonMobil, now has three ETFs, including the $100 million Transform Climate ETF (NETZ).Engine No. 1 calls NETZ not an ESG fund, and instead of While excluding carbon-emitting companies, such as some green-focused ETFs, the fund includes companies whose shareholder voting could drive change in carbon-rich industries. Some of the fund’s top holdings include Applied Materials, Waste Management, and Union Pacific. – CNBC’s Michael Bloom contributed to this report.
(TagsToTranslate)Harbor Company Culture Small Cap ETF
