ESG ETF Investing ‘Should At Least Double’ This Year, Says Industry Savant

After outperforming benchmarks during the first quarter of this year, interest in environmental, social, and governance (ESG) investing is surging, though questions remain.

ESG exchange-traded fund (ETF) investing “should at least double” this year, according to Tom Lydon, the chief executive at ETF Trends who went on CNBC’s ETF Edge last week. “There is definitely more interest there,” he added.

Investor interest has certainly spiked in recent years. Last year, sustainable open-ended funds and ETFs in the US attracted $20.6 billion in assets, a record nearly four times the previous amount, according to Morningstar.

But Lydon called the record amount a “head scratcher,” given that it does not even come close to the amount generally held in ETFs: a whopping $6 trillion in the US.

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Regardless, Lydon is betting that challenges around the coronavirus crisis and the George Floyd protests will increase investor interest in companies that improve their corporate values.

“Racism has no place in America and the events of last week kind of give corporate America an opportunity to reaffirm that their clients, their employees, their shareholders where they stand on this,” Lydon said.

But some critics say that many ESG funds are essentially tech growth funds, given that outperformers have a heavy allocation toward companies such as Apple and Microsoft.

For example, about 14 out of 17 ESG exchange-traded and mutual funds with more than $250 million in assets under management lost less value than the S&P 500 index in the first quarter, according to S&P Global Market Intelligence.

The top performer on the list was the tech-heavy Nuveen Winslow Large-Cap Growth ESG Fund, which gained 3.4% this year through May 15, compared with an 11.4% decline in the S&P 500. The Nuveen ESG fund is about 45% invested in the information technology sector.

But advocates say the tech-heavy ESG funds are meant to act as better alternatives to core index funds.

“Those are the companies that are not only doing well in the coronavirus environment, but probably coming out on the other end of this, are going to continue to do well,” Lydon said.

“And if those have high ESG scores, which they do, that does nothing but help improve the confidence of the average investor there,” he added.

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Tags: company, environmental social and governance investing, ESG, exchange-traded fund, Investment, Investment Fund, Mutual Funds, Socially Responsible Investing

The Presbyterian Church’s Board of Pensions has named Donald Walker III as its new CIO to manage its $9 billion investment portfolio. And the newly formed Illinois Police Officers’ Pension Investment Fund has named Richard White as its interim executive director.

Effective July 1, Walker will succeed Judith Freyer, who announced her retirement in March after more than 30 years at the fund. She will remain as chief investment officer emeritus and will assist in the transition through July.

“Judy’s diligent stewardship throughout more than 30 years has greatly benefited thousands of benefits plan members, retirees, and their families,” the Rev. Frank Clark Spencer, president of the church’s Board of Pensions, said in a release. “For nearly half that time, Don has been at her side. The board is deeply grateful to Judy for mentoring him through the years and is equally confident in his leadership as we move forward.”

Walker currently serves as vice president and deputy CIO, managing the public securities and operations staff of the investment team. The church’s board of pensions promoted Walker to managing director, investments in 2011 and named him to his current post in 2016. He first joined the board of pensions in 2006 from the investment firm Janney Montgomery Scott, where he was vice president, portfolio strategist. Previously, he had been vice president, equity portfolio manager/analyst at First Albany Capital.

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“Judy and I have worked together for more than half of my career,” Walker said in a statement. “I couldn’t have asked for a better mentor—or a better CIO model.”

Walker serves on the investment subcommittee of the American Friends Service Committee and is co-president of Wolf Performing Arts Center in Bryn Mawr, Pennsylvania. He earned a Bachelor of Arts in Middle Eastern history, cum laude, from Amherst College and an MBA from Villanova University.

Meanwhile, Richard White has been named interim executive director of the Illinois Police Officers’ Pension Investment Fund, which was created to consolidate the state’s police pensions. White will serve successive one-year terms as interim executive director until a permanent executive director is selected by the board of trustees.

The Pension Investment Fund was formed to consolidate the investment assets of the 353 Article 3 Illinois police pension plans into one statewide investment asset pool by no later than July 1, 2022. After the conclusion of the transition period, the Pension Investment Fund will manage an estimated $8.3 billion in assets.

During his law enforcement career, White served as a member of the board of trustees for the Orange County Employees’ Retirement System in Southern California. He also has served as president of California’s State Association of County Retirement Systems’ board of directors and was the retirement administrator for the Mendocino County Employees’ Retirement Association.

White earned a Master of Science degree from the University of San Francisco.

“White brings decades of experience as a sworn law enforcement officer and as a public pension fund trustee and administrator,” Shawn Curry, chairman of the Illinois Police Officers’ Pension Investment Fund, said in a statement. “We look forward to working with Richard as we create a fund to serve the participants and beneficiaries of the Illinois downstate and suburban police pension funds.”