The growing supply of environmental, social and governance-related exchange-traded funds won’t be enough to meaningfully mitigate broad issues such as climate change, Van Eck Associates’ CEO says.
“ESG is good as a coherent investment approach on a fund-by-fund basis to make a difference and it’s good signaling, but to put it in perspective, it’s not going to change the end result of where we need to be,” Jan Van Eck told CNBC’s “ETF Edge” this week.
Many of this year’s record number of ETF launches have been ESG funds, with several top issuers launching theme-based versions of their most popular funds:
- The SPDR S&P 500 ESG ETF (EFIV), based on the SPDR S&P 500 ETF (SPY)
- The iShares ESG U.S. Aggregate Bond ETF (EAGG), based on the iShares’ Core U.S. Aggregate Bond ETF (AGG)
- The PIMCO Enhanced Short Maturity Active ESG Exchange-Traded Fund (EMNT), based on PIMCO’s Enhanced Short Maturity Active Exchange-Traded Fund (MINT)
- The VanEck Morningstar ESG Moat ETF (MOTE), based on VanEck’s Morningstar Wide Moat ETF (MOAT)
When it comes to exacting significant change, however, “where the real lift is going to come is from breakthrough technologies” such as drought-resistant farming, van Eck said in the Monday interview.
“It’s really the technology companies and technology investing, whether privately or with public companies, that’s going to really bend the curve here.”
That may be why the CEO says MOTE has a “growthier flavor” than its non-ESG counterpart, with Alphabet, Microsoft, ServiceNow, Applied Materials and Salesforce.com making up the ETF’s top holdings.
Though there may seem to be a surplus of ESG offerings on the market, investor interest should catch up, CFRA’s senior director of ETF and mutual fund research Todd Rosenbluth said in the same interview.
“There’s more supply right now than demand, but the future looks great, we think, for ESG-related products,” he said. “We think we’re going to see more of these products.”
An ESG version of Invesco’s QQQ Trust (QQQ) could launch by the end of the year, Rosenbluth said.
But investors already have a range of options in all corners of the ESG space, he added — clean energy funds such as the iShares Global Clean Energy ETF (ICLN), issues-based funds such as the Simplify Health Care ETF (PINK), which donates a minimum of $100,000 a year in net profits to the Susan G. Komen breast cancer organization, and plays focused on corporate governance such as Engine No. 1’s Transform 500 ETF (VOTE).