Sustainable Investing: Align Returns with Higher Aspirations
March 02, 2022
Read Time 4 MIN
For many investors, it is no longer just a matter of setting financial goals for their portfolios. Increasingly, it may also be as important for them to ensure that how their money is invested reflects their values and concerns.
For some, these may revolve around the challenges posed by a rapidly increasing world population, leading to concerns about food supply. And, if agricultural output must significantly increase to feed an increasing population, how can we ensure that the world’s resources are used responsibly?
For others, it may be climate change that resonates. Their focus may be on achieving carbon neutrality and ensuring that there are enough raw materials to support the energy transition.
We believe that for such investors, the UN’s Sustainable Development Goals, and how available investment solutions may align with them, can offer a useful way to help gauge whether their portfolios reflect their values and concerns.
What are the UN Sustainable Development Goals?
The UN Sustainable Development Goals (“SDGs”) represent a globally agreed upon framework that can help investors understand and measure how their portfolios are contributing to addressing critical global sustainability issues.
An overarching principle of the SDGs is to provide a viable model for economic growth that does not come at the expense of certain societies or the environment. SDGs comprise 17 broad, complex and interconnected environmental and social goals, with detailed targets representing a global consensus on sustainable development priorities through 2030.
Sustainable Development Goals
Source: United Nations
A Framework to Guide Investment Decisions
SDGs have gained widespread support across a broad constituency, including corporations, international development organizations and governments. Asset managers and asset owners are increasingly looking to align investment processes with these goals, as interest in and demand for responsible investing continues to grow.
SDGs can provide a framework to mobilize the trillions of dollars needed to achieve these goals, and also to identify opportunities for social, environmental and financial returns. The cost of achieving SDGs is enormous, but so are the potential economic benefits. In addition, the costs of failure have the potential for, in our opinion, large economic consequences.
Investors can use SDGs in several ways, depending on their specific objectives. From a purely financial perspective, SDGs can help investors understand the sustainability issues that can create material risks within a portfolio. Similarly, they can help identify investments that can benefit from offering solutions to sustainability challenges. At a more macro level, SDGs can help identify systemic risks as well as emerging long-term megatrends that may drive financial returns in the future. For investors looking to measure both societal and financial returns, SDGs offer a framework to measure impact. Providing a common language among investors and companies, SDGs also serve as a platform for engagement on sustainability issues.
VanEck’s Sustainability-Related Solutions and SDGs
To help investors better identify the sustainability-related solutions we offer at VanEck that are associated with those SDGs in which they may be interested, we have “mapped” how each of their investment universes aligns with individual SDGs. While there is no “hard and fast” science to such mapping, we believe it should help investors to focus on their particular interests.
SDG/VanEck Sustainability-Related Solution “Map”
|UN||SDGs||Environmental Sustainability Fund
|Green Metals ETF
|Green Bond ETF
|Morningstar ESG Moat ETF
|HIP Sustainable Muni ETF
|Low Carbon Energy ETF
|Future of Food ETF
|3||Good Health and Well-Being||■||■||■||■|
|6||Clean Water and Sanitation||■||■||■||■|
|7||Affordable and Clean Energy||■||■||■||■||■|
|8||Decent Work and Economic Growth||■||■|
|9||Industry, Innovation and Infrastructure||■||■||■||■||■||■|
|11||Sustainable Cities and Communities||■||■||■||■||■|
|12||Responsible Consumption and Production||■||■||■||■||■|
|14||Life Below Water||■||■|
|15||Life on Land||■||■||■|
|16||Peace, Justice and Strong Institutions||■|
|17||Partnership for the Goals||■|
Source: United Nations, VanEck
VanEck’s U.S. Fund-Based Sustainability-Related Solutions
VanEck Green Bond ETF (GRNB) provides exposure to bonds that fund projects and activities that positively impact the environment. It includes only U.S. dollar-denominated bonds designated as “green” by the Climate Bonds Initiative.
VanEck HIP Sustainable Muni ETF (SMI) offers investors current income that is generally exempt from federal income tax by investing in investment grade municipal debt securities that have been issued to fund operations that support or advance sustainable development, as well as promote positive social and environmental outcomes.
VanEck Green Metals ETF (GMET) provides global exposure to companies with economic exposure to metals key to supporting increasing demand for green energy.
VanEck Low Carbon Energy ETF (SMOG) provides exposure to low carbon energy that includes not only solar, wind and hydro companies, but also in more recently developing areas of the market such as electric vehicles, battery tech, hydrogen and fuel cells.
VanEck Future of Food ETF (YUMY) offers actively managed exposure to the leading innovators and disruptors solving some of today’s most difficult agricultural challenges.
VanEck Morningstar ESG Moat ETF (MOTE) leverages Morningstar’s forward-looking Sustainalytics ESG1 risk analysis to isolate attractively priced “wide moat” stocks screened for ESG risks.
VanEck Environmental Sustainability Fund (ENVAX) is designed to provide investors with exposure to global companies operating in a variety of environmental sustainability sectors such as renewable energy, smart resource management, agriculture technology, recycling, water and advanced materials.
1 ESG: Environmental, social and governance.
This material does not constitute an offer to sell or solicitation to buy any security, including shares of any Fund. An offer or solicitation will be made only through a Fund’s prospectus or summary prospectus and will be subject to the terms and conditions contained. This material and the information provided herein are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of (or located or established in) any jurisdiction where the distribution of these materials and/or the purchase or sale of interests of a Fund would be contrary to applicable law or regulation or would subject a Fund to any registration or licensing requirement in such jurisdiction. Persons who wish to review this material are required to inform themselves about and to observe any legal or regulatory restrictions which may affect their eligibility to make an investment in a Fund. Professional advice should be sought in cases of doubt.
Any projections, market outlooks or estimates in this material are forward-looking statements and are based upon certain assumptions that are solely the opinion of VanEck. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Further, any information regarding portfolio composition, portfolio composition methodology, investment process or limits, or valuation methods of evaluating companies and markets are intended as guidelines which may be modified or changed by VanEck at any time in its sole discretion without notice.
The VanEck Environmental Sustainability Fund’s sustainability strategy may result in the Fund investing in securities or industry sectors that underperform other securities or underperform the market as a whole, and may result in the Fund being unable to take advantage of certain investment opportunities, which may adversely affect investment performance. The Fund is also subject to the risk that the companies identified by the Adviser do not operate as expected when addressing sustainability issues. Regulatory changes or interpretations regarding the definitions and/or use of sustainability criteria could have a material adverse effect on the Fund’s ability to invest in accordance with its sustainability strategy.
Companies that promote positive environmental policies may not perform as well as companies that do not pursue such goals. Issuers engaged in environmentally beneficial business lines may be difficult to identify and investments in them maybe volatile. Environmentally-focused investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by the Adviser or any judgment exercised by the Adviser will reflect the opinions of any particular investor.
Principal VanEck Equity ETF Risk Factors include sector, market, economic, political, foreign currency, world event, index tracking and non-diversification risks, as well as fluctuations in net asset value and the risks associated with investing in less developed capital markets. The Funds may loan their securities, which may subject them to additional credit and counterparty risk.
Sustainable Investing Considerations: Sustainable investing strategies aim to consider and in some instances integrate the analysis of environmental, social and governance (ESG) factors into the investment process and portfolio. Strategies across geographies and styles approach ESG analysis and incorporate the findings in a variety of ways. Incorporating ESG factors or Sustainable Investing considerations may inhibit the portfolio manager’s ability to participate in certain investment opportunities that otherwise would be consistent with its investment objective and other principal investment strategies.
ESG integration is the practice of incorporating material environmental, social and governance (ESG) information or insights alongside traditional measures into the investment decision process to improve long term financial outcomes of portfolios. Unless otherwise stated within the Fund’s investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective, but rather describes how ESG information is integrated into the overall investment process.
ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by VanEck or any judgment exercised by VanEck will reflect the opinions of any particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and VanEck is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.
Please see the prospectus and summary prospectus of each fund for more complete information regarding its specific risks. You can lose money by investing in the Funds. Any investment in the Funds should be part of an overall investment program, not a complete program. Diversification does not assure a profit or protect against loss. Past performance is no guarantee of future results.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
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