IMPACT INVESTING 2022/Q2 - Page 5

From the desk of

Doug Couden, CFA

With companies and investors increasing their public commitments to sustainability related goals, the transition process presents the opportunity for investors to help enact real change. However, meeting these goals means different things for different sectors and different companies - some will need to fundamentally change what they do and how they do it, while others can achieve their targets with more modest shifts.

From Concept to Reality: The Next Phase of the ESG Transition is Here

Although moving to a more sustainable future is clearly desirable and presents an array of investment opportunities, transition does not come for free and the question of who should bear that cost sits largely unaddressed given the intersection of government and corporate policies. For investors, there is also the question of whether it is better to invest in sectors (and companies) that are more advanced in their transition process or those that are just starting out given the costs and potential return trade-offs involved.

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Chief Investment Officer

ESG-Related Indices Have Tracked the Broader Indices in This Year's Selloff

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Declines in ESG ETFs assets, which fell 14% in the first half of 2022 as the rate of inflows slowed, are in part due to new ESG reporting regulations. We believe new regulations are likely to play a key role in shaping the market (e.g., the SEC's fund disclosure rule could create a slimmer market by slowing new launches that might not meet regulatory requirements).

Will a Slowdown in ESG ETF Assets Continue After Record Growth?

Based on fund AUM. Source: Bloomberg, BakerAvenue. As of 6/30/2022.

Sources: EPFR, Barclays Research.