What’s the outlook of environmental, social and governance (ESG) investing under the Trump administration?
It was reported within hours of President Donald Trump being sworn in that the climate change page of the White House websitewas taken down, as were nearly all mentions of climate change.
“If that’s any indication … is ESG simply out of step with business, the electorate, with the movement of the [government]?” Paul Britt, an analyst at FactSet, asked during a panel discussion on ESG and ETFs at the Inside ETFs conference.
Conor Platt, co-founder and CEO of Etho Capital, isn’t too worried. Etho Capital is an active investment manager that creates strategies that deliver financial performance in combination with greater ESG sustainability.
In fact, Platt said, since Trump’s inauguration Etho Capital has “strangely outperformed more.”
“What’s true is that consumers vote every day,” Platt said. “Businesses vote every day. They buy high-quality products. Whatever the energy sector does – which seems to be the most concern with Trump related to ESG – I mean, we’re really not very concerned about it.”
According to Platt, companies that are “most efficient” in their supply chain of operation will do well in a low-energy environment and a high-energy environment.
“I’m not quite certain – from what I’ve heard – how the energy sector’s going to do under Trump,” Platt added. “It sounds like less regulation and perhaps stable pricing, who knows.”
However, Platt said he also imagines energy prices might go lower, and “those energy companies might not do as well.”
On the flip side, Etho can also use data to short companies.
“And [there’s] plenty of energy companies to short,” Platt said.
Meanwhile, Jordan Farris, vice president and head of ETF product development at Nuveen, expects there might be a “shift from the amount of support in the public space to more support in the private space” during the Trump presidency.
Farris also plugged ESG investing as a way to protest.
The day after Trump’s inauguration, millions of people gathered for the Women’s March on Washington and sister marches in every state as well as other countries worldwide.
“The message coming out of that is people are passionate about ESG issues – whether they were calling it ESG at that point in time or not,” Farris said.
“That’s meaningful and that’s a way for people to express themselves,” Farris said. “Now, not as sexy as multimillion-person protests across the world, ESG-related ETFs … are a way for investors to express themselves over the long term.”
Despite Trump’s policy views, Jessica Huang, vice president of global impact investing at BlackRock iShares, has a positive outlook on ESG ETFs based on the investors that are driving ETF demand.
Huang said, at iShares, they’re seeing interest among direct and institutional clients.
On the direct side, she added, interest is really being driven by millennial investors and women.
“These are two investor groups that have been identified to be two times more likely to adopt [ESG strategies],” Huang said. “These are two actually increasingly important investor groups. Women already control over 50% of the household wealth in the U.S. Millennials, while they only control $1 trillion right now, they’re set to inherit $30 trillion in the coming decades.”
— Check out ETFs in 2016 Were Like ‘Michael Phelps in a Shark Suit’ on ThinkAdvisor.