It's hard to put a score on the "S" and "G" parts of ESG investing, which is why ALPS Advisors focuses on the "E," says Andy Hicks, director of ETF research and strategy at ALPS Advisors, at the 2020 Inside ETFs conference.
"The E in ESG is something we know for sure, in terms of environmental. We can put an actual litmus test on companies that are either clean or dirty," Hicks said. "The S and the G, the social and the governance, is a little bit more opaque in terms of how people are scoring those."
He said ALPS launched its ACES clean energy ETF a year and a half ago, partnering with CIBC to create a portfolio with only pure-play companies—those with over 50% of their revenue being generated from clean energy sources.
"Our job as people who create ETFs is not to give people something that is gimmicky," Hicks said. "Until we can come up with a standardized litmus test for the true 'SG' component of that, I don't see ALPS ever launching something that's the full suite of it."
