One of the results of the ongoing momentum building for environmental, social, and governance (ESG) investing is that the conversations around ESG, sustainability, and good corporate stewardship are expanding and becoming more prominent.
Those are positives, but not all exchange traded funds on the ESG block address those concepts. The Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) answers those bells. The $300 million JUST, which turns four years old in June, is relevant now as companies look for ways to address myriad ESG concerns.
“Corporations have been grappling with the Business Roundtable’s all-important 2019 statement of intent — to move from financial shareholder primacy to broader stakeholder capitalism — and how to translate these goals into practical, measurable, and trackable ESG efforts in their businesses. According to Bloomberg Intelligence, Global ESG assets could exceed $53 trillion by 2025,” reports Dambisa Moyo for the Harvard Business Review.
JUST follows the JUST U.S. Large Cap Diversified Index, which goes well beyond the methodologies of traditional ESG benchmarks. While the old way of embracing ESG relies heavily on excluding certain industries with the fund structure, ESG is evolving, and JUST meets that challenge.
The Goldman Sachs ETF relies more on inclusion. Specifically, the fund relies on scores of inputs to construct a portfolio that is one of the more complete combinations of sustainable capitalism, or the marriage of prioritizing both shareholder outcomes and ESG principles.
“Business leaders should be aware of the risk that a dogged ESG focus could be seen by some shareholders as harmful or compromising financial shareholder returns. That said, ESG advocates suggest that returns from ESG investment funds are not lower than those of traditional equity funds. In fact, returns can be higher than on broad base indices,” according to the Harvard Business Review.
By focusing on stakeholder capitalism, JUST offers investors a more evolved approach to ESG investing and one that's likely to catch on as more market participants look to go beyond traditional ESG constructs. The Goldman Sachs ETF is also pertinent as more companies realize the benefits of boosting ESG accountability.
“The trend is to make companies accountable to external bodies: not only regulators, but also industry associations and trade bodies. The SEC, for example, is seeking greater clarity on the sustainable credentials of ESG-labeled investment funds. But simply obtaining clarity on how many different organizations define ESG is not enough. For the market to function properly, an open audit system requires harmonized rules followed by all,” concludes the Harvard Business Review.
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