Customers Ask About ESG More Often

Environmental, social and governance (ESG) practices are not only a hot topic among regulators and businesses; investors are more and more informed about this particular area of ​​investment and more often request investments in ESG. Advisors continue to play a vital role in helping to guide ESG investments in the right avenues based on each client’s priorities.

A recent study from Aegon, a global asset manager, found that 41% of advisers are asked by clients more often about ESG investing, the Financial Times reported. Guy Rainbird, director of public affairs at the Association of Investment Companies, believes that climate change issues as well as ESG in general are “represented strongly” as important topics for investors.

“We recognize that many advisors proactively raise the issue of ESG or ethical preferences with clients,” Rainbird said.

It is a trend that is playing out on a global scale. In January, Invesco advisers conducted an ESG investing survey and found that 51% ask investors whether they “would prefer to invest sustainably or not.” However, it is important to go beyond this initial interest and really dig into the motivations of clients to invest in ESG, as well as the areas that are important to them.

“Each client will have their own opinion on ESG, so advisers should ask follow-up questions,” said Paul Chilver, partner and head of financial planning at Birkett Long IFA. “For example, I have clients who are interested in funds that aim to finance solutions to the climate crisis, while other clients want to invest in funds that filter certain areas, for example tobacco.”

SPDR Offers Investments That Eliminate Fossil Fuels

Investors looking to reduce their exposure to fossil fuels in their investments need only look to the SPDR S&P 500 Fossil Fuel Unreserved ETFs (SPYX). Investing is a core allocation to large cap stocks in the S&P 500, except with very small carbon footprints.

The fund tracks the S&P 500 Fossil Fuel Free Index, a benchmark of S&P 500 companies that are “fossil fuel-free”, defined as companies that do not have fossil fuel reserves (thermal coal reserves and under- products of coal reserves, as well as oil or gas reserves).

It is not the same as being without all the stocks of oil. The fund still has minor allocations to traditional energy companies, such as Valero (VLO) and Halliburton (HAL). But without exposure to companies that actually own the physical reserves of oil, coal, or gas, the fund’s energy allocation is drastically reduced. Energy represents only 0.72% of the sector composition of the ETF, against 2.60% of the SPDR S&P 500 ETF Trust (SPY).

SPYX’s main sector allocations include Information Technology at 28.04%, Healthcare at 13.29% and Consumer Discretionary at 12.31%.

SPYX has an expense ratio of 0.20%.

For more news, information and strategy, visit the ESG channel.

About Meredith Campagna

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