Thematic ETFs Could Satisfy Thirst for ESG

Savvy financial advisors can sidestep the political quagmire of ESG investing by using thematic ETFs.

Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: Lisa Barr
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Edited by: Ron Day

It’s no secret ESG investing has morphed into a deeply polarizing political football linked to heated debates over climate change and woke corporate policies. 

The topic was front and center Thursday during the Republican presidential debate when candidate Vivek Ramaswamy, co-founder of Strive Asset Management, referenced the “climate change agenda hoax” and added, “the anti-carbon agenda is the wet blanket on our economy.” 

You know it’s bad when even BlackRock’s CEO Larry Fink—one of the most vocal proponents of getting the wealth management industry on board the ESG train—is suddenly avoiding any references to those three letters representing environmental, social and governance investing. That doesn’t mean he’s dialed down his focus on ESG causes, just that he’s reading the room and responding accordingly. 

Much is being made about the future of ESG investing and how it might continue to evolve and navigate the current public relations obstacles. But in the meantime, there is a universe of financial advisors and investors still thirsting for ways to align their investments with their beliefs around certain ESG causes. 

ESG-Conscious Investors 

That is where the growing universe of thematic ETFs could realize a unique opportunity to give ESG-conscious investors what they want—without being dragged into the morass of dogmatic bickering. 

Consider, for example, the iShares Global Clean Energy ETF (ICLN), which is a $3.5 billion fund offering concentrated exposure to clean energy businesses.  

Nowhere in the name does it suggest an ESG agenda, but this is a thematic strategy that might fit the bill for investors looking to support clean energy businesses.  

Another example of a thematic strategy that could serve ESG investors is the $1.6 billion Invesco Solar ETF (TAN), which invests in an index of solar energy companies. 

According to the etf.com database, there are more than 300 ETFs targeting a specific theme, with combined assets of around $125 billion. 

“I think there’s a place for thematics in ESG investing,” said Komson Silapachai, partner at Sage Advisory.  

He pointed out that with thematic ETFs, financial advisors can target exposure and bypass the ambiguity and potential greenwashing that can sometimes accompany ESG strategies. 

Eric Balchunas, ETF analyst at Bloomberg Intelligence, said thematic ETFs offer “a way to do ESG investing while keeping the cheap beta core in the portfolio.” 

 

Contact Jeff Benjamin at [email protected]  

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Benjamin is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.