Don’t be fooled by most ESG rankings – focus on materiality instead James Harwood
The
Wall Street Journal recently ran an article about how big technology stocks dominate ESG funds. Tech companies are not usually associated with big ESG issues like climate change, renewable energy, or diversity. So, are financial advisers and investors being fooled?
Let’s consider whether the ESG investor is still concerned about investment performance. For most of the ones we may talk to as a fund manager, the answer is yes. Big tech names dominate the market: Apple, Microsoft, Amazon, Facebook and Alphabet are five of the largest companies in the S&P 500, so not holding big tech will impact your investment return versus the broad market. And ESG funds are (understandably) judged against how they perform versus the market as a whole.
Renewed Interest in Regionals
Moving down the market cap ladder, the action in the regional banks has dwarfed that of its national counterparts.
Just like the big banks, most regional banks have reported earnings beats for Q4, including First Republic Bank, PNC Financial, and Citizens Financial Group. But while the fundamental story between the two groups is similar, the trading action is not.
The
Direxion Daily Regional Banks Bull 3X Shares (DPST) is up 128% over the last three months, and year-to-date has taken in over $28 million in inflows.
Data Source:
Bloomberg. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For standardized and month-end
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