Curious about what investors seek in ESG equity index funds? For the $400 billion market in the US alone, it’s about more than just financial gains or lower volatility.
Investors expect ESG funds to outperform on ESG metrics compared to their counterparts. After all, why label them as “ESG” if they aren’t truly ESG-focused?
Tracking ESG scores can be complex, especially for popular indexes like the SPDR S&P 500 ESG ETF linked to the S&P 500 ESG Index from State Street.
Comparisons need to be made, like how the S&P 500 ESG Index performs against its benchmark and how it selects its top 10 companies.
Calculation of cap-weighted ESG scores can be insightful, like our finding of the S&P 500 ESG Index having 6.0% higher ESG score over the S&P 500.
Further comparisons with other ESG indexes show varying ESG score improvements, often minor, challenging the notion that higher fees equate to significantly higher ESG scores.
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Financial advice disclaimer: All content reflects the author’s opinion and does not represent investment advice from CFA Institute or their employer.
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