Environmentally Responsible Equity

Environmentally Responsible Equity Funds and ETFs have a mandate to invest in... Environmentally Responsible Equity Funds and ETFs have a mandate to invest in securities that score high on environmental factors. Environmental factors can include a company’s carbon footprint, as well as any efforts to mitigate this impact. Pollution and waste are other environmental issues within the ESG umbrella. Environmentally Responsible Equity Funds and ETFs may also take into account the resources used by a company to make their products. For example, a company that uses aluminum in its manufacturing might be evaluated based on the environmental impacts of the aluminum smelters that produced the metal. Reporting is integral to scoring well on environmental factors. The more detail a company provides on its environmental footprint, the more likely it is to score well, assuming that the data is credible and generally positive. Environmental factors can be used as either a positive or negative screen. A positive screen looks to include companies in a portfolio that are leaders on issues of sustainability—such as a company that uses recycled materials. Meanwhile, a negative screen omits companies from certain sectors with issues that cannot be overcome. These might include oil and gas companies, for example. It is important to note that Environmentally Responsible Equity Funds and ETFs can be controversial. Some investors maintain an environmental lens is good investing, while others point to data showing underperformance by funds that use this analysis as a key input into their investment decisions. Last Updated: 12/12/2024 View more View less

Environmentally Responsible Equity Funds and ETFs have a mandate to invest in securities that score high on environmental factors. Environmental factors can include a company’s carbon footprint, as well as any efforts to... Environmentally Responsible Equity Funds and ETFs have a mandate to invest in securities that score high on environmental factors. Environmental factors can include a company’s carbon footprint, as well as any efforts to mitigate this impact. Pollution and waste are other environmental issues within the ESG umbrella. Environmentally Responsible Equity Funds and ETFs may also take into account the resources used by a company to make their products. For example, a company that uses aluminum in its manufacturing might be evaluated based on the environmental impacts of the aluminum smelters that produced the metal. Reporting is integral to scoring well on environmental factors. The more detail a company provides on its environmental footprint, the more likely it is to score well, assuming that the data is credible and generally positive. Environmental factors can be used as either a positive or negative screen. A positive screen looks to include companies in a portfolio that are leaders on issues of sustainability—such as a company that uses recycled materials. Meanwhile, a negative screen omits companies from certain sectors with issues that cannot be overcome. These might include oil and gas companies, for example. It is important to note that Environmentally Responsible Equity Funds and ETFs can be controversial. Some investors maintain an environmental lens is good investing, while others point to data showing underperformance by funds that use this analysis as a key input into their investment decisions. Last Updated: 12/12/2024 View more View less