Investments with an ESG (environmental, social, governance) label have become very popular among investors who want their money to match their social values. The rise of ESG has meant that other forms of values-based investing have been labelled as ESG, perhaps incorrectly.
ESG, put simply, is an investment screening process. Securities are selected with consideration to their environmental, social, and governance scores. This creates a basket of securities which are considered to either be ‘doing good’ or not ‘doing bad.’ This process is applied to the Harvest ESG Equity Income Index ETF.
A clean energy ETF, such as the Harvest Clean Energy ETF, is focused on companies related to the clean or renewable energy industry. Because these companies are considered to be doing good for the environment, these investments could be perceived as ESG. However, clean energy ETFs are considered hybrid or thematic, built to capture a business theme rather than focus on a set of social values.
You can learn more about ESG ETFs, Hybrid/Thematic ETFs and other forms of values-based investing here.