Sustainable ETFs won’t give you an edge

Article Excerpt

BMO launched seven environmental, social and governance (“ESG”) funds on January 21, 2020; these include a balanced fund, equity funds, and bond funds. Here’s a look at two of them: Sustainable investing offers some investors a lot of conceptual and emotional appeal. But does investing in those kind of stocks hurt your portfolio returns? Yes. One way is that the ethical criteria they follow could keep investors out of promising stocks with the power to boost their long-term portfolio returns. In addition, those criteria can also encourage the ETF’s managers to include stocks that score high in sustainability but lower in key financial measures. BMO MSCI CANADA LEADERS INDEX ETF $23.95 (Toronto symbol ESGA) invests in Canadian-listed companies that the managers see as having high ESG (environmental, social and governance) scores. The fund has top holdings in TD Bank, Enbridge, Bank of Nova Scotia, Canadian National Railway and Shopify. In turn, the industry exposures reflect the broader Canadian market, with high weightings in Financials (34%) and…