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Wall Street Math Shows ESG Funds Can Ride the Value Stock Boom

Bank of America’s analysis shows portfolios overweight industrial and raw-material stocks.

BlackRock’s iShares ESG Aware MSCI USA ETF (ESGU) is the biggest ESG exchange-traded fund with $16 billion in assets.

BlackRock’s iShares ESG Aware MSCI USA ETF (ESGU) is the biggest ESG exchange-traded fund with $16 billion in assets.

Photographer: Jeenah Moon/Bloomberg
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Green funds have gained a reputation of benefiting from the tech rally during the pandemic. As the economy recovers and investors shift to cheaper stocks, those products might still be able to thrive.

Relative to the S&P 500, funds that track companies that meet environmental, social and governance standards have more exposure to cyclical sectors than the broader industry, according to a Bank of America analysis. Those U.S.-domiciled ESG products are overweight industrial, raw-material and real-estate shares, while mutual funds in general are underweight those groups.