The disruption and uncertainty caused by the global pandemic ignited a renewed interest from investors, consumers and employees to favor those corporations that prioritize environmental, social and governance (ESG) causes. These companies focus on issues that matter to all stakeholders and may sacrifice short-term profits in favor of long-term impact.
The fund industry has pounced on investor interest in sustainable investing. Funds focused on ESG investing managed about $2.7 trillion in 2021, according to Morningstar.
By creating societal value through sustainable practices, shares of these corporations also tend to be more resilient than their peers.
For example, research from Bank of America shows that shares of corporations with solid ESG practices tend to be less volatile, have higher three-year returns, and are less likely to declare bankruptcy.
One way to invest in socially conscious companies is through ETFs like the iShares MSCI USA ESG Select ETF (SUSA), which tracks an index of highly rated ESG companies. Some of the names in the fund include Microsoft (MSFT), Apple (AAPL), Home Depot (HD) and Tesla (TSLA). Other options include the iShares Global Clean Energy ETF (ICLN) or the SPDR S&P 500 ESG ETF (EFIV).
Purpose-led organizations hope to set the pace for a better future. By focusing their efforts on reducing carbon emissions, minimizing waste, advancing social issues, and fostering equality, equity and inclusion, among other noble causes, these corporations are redefining the role of business in society.