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What’s ‘woke’ got to do with it?

The term woke has been around for decades, having originated in African American Vernacular English in the 1940s. But it only became a household term in the mid-2010s to refer to being “aware of and actively attentive to important societal facts and issues, especially issues of racial and social justice,” according to Merriam-Webster’s definition.

More recently, it’s become a slang word to refer to people who, as defined by Merriam-Webster, are “politically liberal (as in matters of racial and social justice) especially in a way that is considered unreasonable or extreme.”

In that vein, many Republicans have accused big businesses and money managers of pursuing an ideological agenda on climate change and other environmental, social and governance (ESG) issues at the expense of solid financial returns.

Florida Gov. Ron DeSantis in particular has made resisting the “woke mob” a top priority. In February, DeSantis approved updates to the Florida Retirement System Pension Plan policy, banning fiduciaries from considering ESG in their investment decisions.

A handful of other states enacted similar legislation in 2022, while several more have bills in the works.

However, beyond the political discourse, ESG investments have been weathering a period of relatively weak performance. According to Bloomberg analysis, global ESG funds have underperformed the broader market in the past five years.

If you’re spooked by the prospect of investing in ESG funds, here are three other assets you might consider.

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Energy Select Sector SPDR Fund

The traditional energy sector enjoyed an impressive 2022 due to high market prices in the wake of Russia’s invasion of Ukraine.

The Energy Select Sector SPDR Fund (XLE) — an exchange traded fund (ETF) that provides exposure to oil and gas companies — is up 2% in the last 12 months, in contrast to the S&P 500s 4% decline in the same period.

In 2022, the fund paid investors a dividend of $3.22 per share, with an annual yield of 3.46%.

The Energy Select Sector SPDR Fund’s top holding is Exxon Mobil Corporation (XOM) at 22.86%

Exxon is the largest energy company in the country, commanding a market cap of over $480 billion. Its shares are up 44% over the past year thanks partly to its record profits of around $58 billion in 2022.

Solid financials allow the energy giant to return cash to investors. Exxon pays quarterly dividends of 91 cents per share, translating to an annual yield of 3.1%.

Health Care Select Sector SPDR Fund

The health care sector is another linchpin of U.S. society, with stocks staying strong even as high inflation rocks the rest of the market.

The Health Care Select Sector SPDR Fund (XLV) provides exposure to companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries.

The fund is down 11% in the last 12 months, has a dividend yield of 1.6% and paid $1.99 per share in 2022.

Its top holding is UnitedHealth Group Inc (UNH) at 9.16%. UnitedHealth is the largest health care company in the country with a market cap of $460 billion.

The health insurance giant has outperformed the S&P 500 index in nine of the past 10 years (apart from 2019 when the S&P 500 saw explosive 29% growth) thanks to its continuous growth in revenue and bottom line. The company finished 2022 with $324.2 billion in revenue, up 13% year over year.

UnitedHealth pays a quarterly dividend of $1.65, with an annual dividend yield of 1.34%.

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Point Bridge America First ETF

Described by some as an “anti-woke fund,” the Point Bridge America First ETF (MAGA) exposes investors to companies that align with Republican political beliefs.

Launched in 2017, the ETF’s ticker code MAGA stands for “Make America Great Again” — a political slogan used by Donald Trump in his successful 2016 presidential campaign

Point Bridge Capital says “the MAGA Index is made up of 150 companies from the S&P 500 Index whose employees and political action committees (PACs) are highly supportive of Republican candidates” — basically, they donate to the party.

The Point Bridge America First ETF is down 4% in the last 12 months. The fund pays out 51 cents per share, with an annual dividend yield of 1.4%.

Its top holding is Valero Energy Corp. (VLO) at 0.82%. Valero has enjoyed a 19% spike in performance in the past 12 months. It pays investors $1.02 per share, with an annual dividend yield of 3.4%.

Ironically, Valero (like most major energy companies) has made an ESG pledge focused on “addressing global climate change risks.” It claims to be a leader in low-carbon renewable fuels and is on track to achieve 100% global refining greenhouse gas emissions by 2035.

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About the Author

Bethan Moorcraft

Bethan Moorcraft

Reporter

Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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