In today's market, investors have more options than ever to incorporate environmentally friendly strategies into their portfolios, thanks to the rise of green exchange-traded funds (ETFs). As awareness of environmental, social, and governance (ESG) issues grows, more investors are turning to ETFs that address large-scale global challenges.
This shift has made sustainable ETFs, like American Century Sustainable Growth ETF (ESGY), Nuveen Winslow Large-Cap Growth ESG ETF (NWLG), and Ishares ESG Aware MSCI USA Growth ETF (EGUS), increasingly popular among eco-conscious investors.
So, what exactly are ESG funds? They are investments that prioritize companies making a positive environmental and societal impact, such as those with minimal carbon footprints or diverse leadership. Unlike individual stocks, ESG funds comprise a collection of multiple stocks, which helps mitigate risk by spreading investments across various companies. ETFs, similar to index funds, offer the added flexibility of being traded throughout the day like stocks.
A recent “Sustainable Signals” report by Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Wealth Management reveals that interest in sustainability is on the rise. Over half of individual investors plan to increase their sustainable investments within the next year, with more than 70% believing that robust ESG practices can lead to higher returns.
Moreover, ESG investing is poised for significant growth, with assets in dedicated ESG funds potentially rising from $8 trillion today to $30 trillion by 2030. Given this favorable backdrop, let’s look at the fundamentals of the aforementioned ETFs in detail:
American Century Sustainable Growth ETF (ESGY)
ESGY is an exchange-traded fund launched and managed by American Century Investment Management Inc. This fund targets the U.S. public equity markets, focusing on companies across various sectors, including growth and value stocks of large-cap companies, specifically those within the market capitalization range of the Russell 1000 Growth Index. ESGY emphasizes investing in socially conscious businesses that actively promote environmental responsibility.
The fund has $19.70 million in assets under management (AUM). Its top holdings are Microsoft Corporation (MSFT), with a 14.55% weighting, NVIDIA Corporation (NVDA) at 8.47%, and Apple Inc. (AAPL) and Alphabet Inc. (GOOGL), at 8.20% and 6.51%, respectively. The fund has a total of 86 holdings.
ESGY has an expense ratio of 0.39%, compared to the category average of 0.37%. Its fund inflows were $2.78 million over the past three months and $4.55 million over the past year.
The fund pays an annual dividend of $0.16, translating to a 0.28% yield at the prevailing price level. Its four-year average yield is 0.27%.
Over the past nine months, ESGY has gained 31.4% to close the last trading session at $54.40. It has also gained 19% year-to-date. The ETF had an NAV of $54.62 as of July 17, 2024.
ESGY’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ESGY has an A grade for Trade and Buy & Hold. Among the 128 ETFs in the Alternative ETFs group, it is ranked #72. To access all of ESGY’s POWR Ratings, click here.
Nuveen Winslow Large-Cap Growth ESG ETF (NWLG)
NWLG is launched and managed by Nuveen Fund Advisors, LLC. The fund invests at least 80% of its net assets in equity securities of U.S. companies with market capitalizations exceeding $4 billion at the time of purchase. It focuses on companies that exhibit sustainable environmental, social, and governance (ESG) characteristics.
The fund has 40 holdings. Its top holdings include MSFT, with a 12.89% weighting, and NVDA, at 9.76%, followed by Amazon.com, Inc. (AMZN) and AAPL, with 8.49% and 5.69% weightings, respectively.
The fund has an expense ratio of 0.65%. Over the past six months, NWLG’s fund inflows came in at $600.72 thousand over the past three months.
NWLG has gained 34.7% over the past year and 20.9% over the past six months to close the last trading session at $32.60. As of July 17, 2024, NWLG had an AUM of $8.80 million and an NAV of $31.59.
NWLG’s POWR Ratings reflect solid prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
NWLG has an A grade for Trade and a B for Buy & Hold. Of the 61 ETFs in the A-rated Large Cap Growth ETFs group, it is ranked #46.
Beyond what we stated above, we have also given NWLG a grade for Peer. Get all NWLG ratings here.
Ishares ESG Aware MSCI USA Growth ETF (EGUS)
BlackRock Fund Advisors manages EGUS. It invests in growth stocks of socially conscious companies promoting environmental responsibility and aims to track an index of U.S. large- and mid-cap equities with positive ESG characteristics.
With $8.40 million in AUM, its top holdings are AAPL, with a 12.50% weighting in the fund, and MSFT at 12.36%, followed by NVDA and AMZN, with 11.80% and 6.51% weightings, respectively. The ETF has a total of 106 holdings.
The ETF’s expense ratio is 0.18%. EGUS fund inflows were $22.58 thousand over the past three months and $15.29 thousand over the past year.
The fund pays an annual dividend of $0.11, which translates to a 0.27% yield at the current price level. Its four-year average yield is 0.22%.
EGUS has gained 34.9% over the past nine months and 30.9% over the past year to close the last trading session at $42.04. The fund’s NAV was $40.82 as of July 17, 2024.
EGUS’ solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold and a B for Peer. EGUS is ranked #43 among 61 ETFs in the same Large Cap Growth ETFs group. Click here to access all the EGUS ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ESGY shares were trading at $54.40 per share on Thursday afternoon, down $1.78 (-3.16%). Year-to-date, ESGY has gained 19.18%, versus a 17.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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