An easy-to-make forecast for 2023 that does not involve predicting market performance involves continued evolution of environmental, social and governance (ESG) strategies. In short, investors passionate about ESG should expect more in the form of regulation, efforts to end greenwashing, more ESG-related refinancing, and a greater focus on reporting and ESG rating, among others. To adequately prepare for these and other trends, investors can consider general approaches such as Invesco ESG S&P 500 Equal Weight ETF (RSPE).
RSPE is the ESG counterpart of Invesco S&P 500 Equal Weight ETF (RSP), the largest and most venerable equal-weight ETF on the market today. As such, RSPE is uniquely positioned to be an ally to investors looking to thrive in a changing ESG landscape. Change is to be expected.
“Efforts continue to standardize metrics, filing requirements and schedules. Mandatory reporting requirements need to be sorted given that the various regulatory demands to date can be overwhelming and costly. Ultimately, the market wants consistent reporting from all participants,” according to FactSet.
Greenwashing is among other issues underscoring the relevance of RSPE for ESG investors. The ETF tracks the S&P 500 Equal Weight ESG Leaders Select Index, which takes a straightforward approach to ESG, but can steer investors away from greenwashing controversies. This is something to ponder, as methodology still matters when regulators target asset managers who inaccurately apply the ESG label.
“Pressure on fund companies will remain high for greenwashing, fund naming, holding crunch and risk analysis. Coherent definitions among global regulators what risks are and how measuring avoidance might help. In addition to better defining key exposures or material factors, the relatively new development of risks described as key adverse impact indicators (PAIs) for application in 2024 will initially complicate the understanding of exposures,” adds FactSet.
Beyond the ESG benefits, RSPE offers investors the traditional advantages associated with equally weighted strategies in a broad market, including reduced concentration risk. None of the ETF’s 183 holdings exceeded a weighting of 0.66% as of January 23. according to transmitter data.
Additionally, RSPE leverages the factors of size and value – two of the primary determinants of equal-weighted outperformance over extended holding periods. Nearly a third of the ESG ETF’s holdings are classified as value stocks and about 49% resides in mid- and small-cap territory.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.