Top asset managers Vanguard Group Inc. and BlackRock Inc. on Sept. 24 introduced new exchange-traded funds that exclude oil companies, coal producers and other industries that a growing number of investors want to avoid.
The so-called ESG funds use environmental, social or governance criteria to pick investments.
"In our conversations clients continuously bring up the topic," said Rich Powers, head of ETF product management for Vanguard, the largest mutual fund company with $6.6 trillion under management.
Researcher Morningstar Inc. found flows into such funds reached a record pace this year, taking in $20.9 billion through June, just shy of the annual record of $21.4 billion for all of 2019.
The demand partly reflects the performance of the funds, which has often topped traditional investment products this year. That was despite many funds being held back by strategies such as not owning high-performing energy stocks, as second-quarter results showed.
The Vanguard ESG U.S. Corporate Bond ETF, the company's first fixed income offering in the sector, will track the Bloomberg Barclays MSCI U.S. Corporate Select Index, which excludes oil and gas, alcohol and civilian firearms companies.
Previously the manager launched ESG equity products including the Vanguard ESG U.S. Stock ETF, now with about $2 billion in assets.
BlackRock, with $7 trillion in total assets, will offer three ESG stock funds that recreate exposure to S&P indexes of large, mid-cap and small-cap companies.
The ETFs will screen out companies with certain levels of investment in the thermal coal, oil sands or shale energy sectors, BlackRock said.
Pin Oak Energy Partners tacked on nearly 10,000 net acres to its Utica Shale position in the Appalachian Basin as part of a recent acquisition from EnCap-backed Protégé Energy.
The acquisition of Noble Energy makes Chevron the No. 2 U.S. shale oil producer behind EOG Resources Inc. and gives it nearly 1 Bcf of international natural gas reserves close to growing markets.
The promise of future returns lured investors, including a wave of acquisitions from 2016-19. Now, many of those shale deals are financially unworkable due to low oil prices.