ETF Stream has partnered with Amundi to analyse the dramatic rise of ESG ETFs. Starting in September 2020, this six-month investigation consisted of three surveys aimed at professional European investors, with two live webinar discussions that focused on key issues in the ESG ETF space.
We have published the findings of this investigation in this report as well as providing a deep dive into two specific areas of the market; engagement and climate ETFs.
Below, we provide snippets of the survey results along with outlining key segments of the report to look for.
The survey results confirm the direction of travel for ESG ETFs. According to PwC, assets in ESG-focused funds will account for more than 50% of the total European fund market by 2025, representing an annual growth rate of 28.8%. Added to this, ESG ETFs in Europe saw more inflows than non-ESG ETFs in 2020, according to data from Amundi.
Source: MSCI
A hotly debated subject among academics but the results show investors are confident they do not have to give up performance when investing sustainably. This has been shown over the past 10 years highlighted by the MSCI World SRI index, which has returned 10.8% a year versus 10.1% for the MSCI World, as at 29 January.
It also appears investors are comfortable with deviating from the parent index when investing in ESG ETFs, potentially a sign investors believe the benefits of sustainable investing outweighs any performance metrics.
Climate ETFs are on the rise with €1.3bn inflows poured into strategies linked to the European Union’s two climate benchmarks; the Climate Transition Benchmark (CTB) and the Paris-aligned Benchmark (PAB). These survey results show investors are starting to take the impact of climate change very seriously.
ESG ETFs are starting to replace traditional core indices in portfolios as highlighted by the inflows into S&P 500 ESG ETFs.
As Ashley Fagan, head of ETF, indexing and smart beta strategy and business development for UK and Ireland at Amundi said:The intensity of the ESG index and the index provider in question are the two biggest considerations for investors when selecting ESG ETFs. Once again, this highlights investors are looking to have a genuine impact when investing sustainably rather than simply treating it as a box ticking exercise.
How ETF issuers engage with individual companies is another increasingly important factor for investors as the data above highlights. European asset managers tend to have far better voting records than their US counterparts however this can vary at an individual issuer level.
Senior Portfolio Manager
Cross Asset Allocation, Ilmarinen
Investment Fund and ETF Specialist
BNP Wealth Management
CIO
Nutmeg