Celebrating Earth Month With an ETF

As the 53rd Earth Day arrives this weekend, we’re reminded that temperatures are still rising, weather continues to grow more extreme and pollution worldwide is worsening. 

At the same time, governments and organizations around the planet are boosting their response to climate change. Investors’ opportunities to act with their money have also grown. 

The iShares ESG Aware MSCI USA ETF is the largest environmental, social and governance exchange-traded fund, with $14 billion in assets. It tracks an index of U.S. companies selected and weighted for positive ESG characteristics.  

The current political environment strives to drive investment capital to companies that meet these standards. Meanwhile, ESGU holds shares in some of the world’s leading technology companies with corporate missions that support ESG, including a nearly 7% exposure to the company with the world’s leading market cap, Apple Inc.  

ESGU also holds shares in Microsoft Corp., Amazon.com Inc. and Nvidia Corp. as well as Exxon Mobile Corp. While the XOM holdings may contradict climate change initiatives, Exxon Mobile says it has committed to sustainability by “improving quality of life by meeting the needs of society.” 

Earth Day puts the spotlight on the companies working to meet the world’s changing needs as it faces what many call the “existential threat” posed by the changing climate.  

ESGU’s Peak 

ESGU reached a record high at $108.91 per share in January 2022. 

Source: etf.com 

The chart above shows ESGU fell to $77.28 per share in October 2022, a 29% decline. While ESGU corrected lower, it remained significantly higher than the December 2016 $48.26 low during the month it began trading.  

October 2022 Bottom  

Over the past six months, ESGU has made a comeback

Source: etf.com 

The chart highlights the pattern of higher lows and higher highs that pushed ESGU to its latest $92.93 peak in February 2023. At $91.17 per share on April 18, ESGU was closer to the recent high than the October 2022 low. 

A Liquid ETF 

While the shares stabilized and increased in 2023, ESGU experienced net fund outflows.  

Source: etf.com 

The etf.com Fund Flows Tool illustrates that $6.67 billion has flowed out of ESGU since the end of 2022. The fund’s market cap of $14.08 billion at $91.17 per share makes the net outflow significant. ESGU is a highly liquid product that charges a 0.15% expense ratio and trades an average of nearly 1.8 million shares daily.  

Meanwhile, less than $280 million has flowed out of ESGU since the end of March, as the selling has declined.  

ESG Retirement Funds Favors ESGU 

In late March, the Republican House of Representatives could not muster the votes to override President Biden’s veto of a bill that would have banned the consideration of ESG issues in retirement and other investment decisions.  

The political climate now supports ESG, and more companies will adapt to fit sustainability into their corporate missions.  

The companies with the top market caps are: 

Source: companiesmarketcap.com 

ESGU holds shares in six of the top eight companies by market cap, indicating that corporate missions have accepted and embraced ESG.  

The Biden administration remains committed to ESG investing and addressing climate change. On Earth Day 2023 on April 22, ESGU is in a short-term bullish trend with the political winds behind its sails as the president used his first veto to secure ESG investing’s future.