Sustainable

ESG INVESTING IS NOT EXACTLY WHAT PEOPLE THOUGHT IT WAS

Published On: June 3rd, 2021|By |Categories: Market Updates, Sustainable|2.9 min read|

It seems that people are finally realising that ESG investing is not exactly what they thought it was – see this recent article in the economist ‘Sustainable finance is rife with greenwash. Time for more disclosure

This comes as no surprise to those of us who been investing sustainably for many years. So what is the issue? Let’s look at the simple example of one of the biggest ESG equity ETF’s , namely the iShares ESG Aware MSCI USA ETF (ESGU) and compare it with the broad US index – the S&P 500 (SPY).

iShares ESG Aware MSCI USA ETF (ESGU) VS. S&P 500 (SPY)

Bron: Strategas Research Partners

Spot the difference? Not easy is it. Little wonder then that the R2 value of the ESGU against the S&P 500 is a whopping 0.97 meaning that 97% of the variability of the ESGU can be explained by the S&P500. Looking at the R2 of the other leading ESG ETF’s confirms this disturbing trend:

Vanguard ESG US stock ETF: R2=0.99

Xtrackers MSCI USA ESG leaders Equity ETF: R2=0.99

Global X conscious companies ETF: R2=0.96

So are there any differences between the S&P 500 and the largest ESG ETF’s? The astute observer will notice one key difference, namely the price. This is typically 5 times or more expensive than the ‘regular’ index.

It will come as no surprise that we at Mpartners are not fans of investing passively in ESG. In our opinion it absolutely requires an active approach.

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ABOUT THE AUTHOR
Didy Michels – van der Schilden, CAIA (1979) is de directeur van Mpartners. In 2003 startte ze haar carrière als hedgefondsanalist bij Insinger de Beaufort Asset Management. Eind 2006 werd ze verantwoordelijk voor institutionele sales van de specialist fondsen en de business development van de afdeling asset management. In 2009 werd ze director, verantwoordelijk voor de afdeling financial product advisory van Bank Insinger de Beaufort. In 2010 heeft zij samen met de andere partners Mpartners opgericht. Tevens is zij mede-oprichter van Alternatives4Children, een stiching die als doel heeft het welzijn van kinderen te verbeteren, met name door het toegang geven tot onderwijs. Didy van der Schilden heeft een B.Sc. van de Hogeschool voor Economische Studies in Amsterdam en is Chartered Alternative Investment Analyst (CAIA).