Data from ETF (exchange traded funds) specialists TrackInsight has shed new light on what is happening in the world of ESG ETFs. These funds are generating increasing investor interest, with 87 new launches to the market in the first quarter of this year.
Assets in ESG ETFs also continued their upward trajectory, with a further $57bn in new asset inflows, taking the total AUM for ESG ETFs to $264bn in total assets.
TrackInsight said that the UN Sustainable Development Goals were fast becoming a benchmark for assessing the sustainability impact of ETFs. TrackInsight data shows that the number of ETFs which now align with the UNSDGs has risen over the last quarter, with 15 of the goals now covered by 316 ETFs by the end of Q1 2021.
The data is part of TrackInsight’s ETF Observatory, which combines its ETF expertise with further methodology from Conser and mapping of funds against SDGs from UNCTAD (United Nations Conference on Trade and Development). As more data become available, it is expected that ESG investing in this space is going to shift to the market norm, rather than being a sub-set of the ETF universe.
According to Conser, many investors are still having a hard time sorting the wheat from the chaff when analysing the ESG credentials of ETFs. Conser says it remains concerned that a lack of transparency means fully ESG investments are struggling to get onto the market. Ultimately investors will want to know that an ETF will meet as many sustainable development criteria as possible and this is where independent data has a role to play.
ETFs had a landmark year in 2020
ESG ETFs had a landmark year in 2020. Looking at the 2020 numbers, the sector seems to show no sign of slowing down.
“With the growth of global sustainable investment, policymakers and regulations have played an important role during this quarter,” said Ailing Zhang, an ETF analyst with TrackInsight. “In Europe, the EU Sustainable Finance Disclosure Regulation (SFDR) came into effect this March. And in US, after returning to the Paris Agreement, President Biden has been positioning himself as a leader with the goal of reducing greenhouse gas pollution by 2030.”
Zhang says It will take time to examine the efficiency of these new rules towards “greenwashing”, but firmly believes that a standardized reporting procedure based on transparency and quantification will help the decision-making process for sustainability-oriented investors
“The surge of interest in responsible investing is undeniable and the trend observed last year is continuing in 2021,” said Fannie Wurtz, Head of ETFs, Indexing & Smart Beta at fund manager Amundi. “At Amundi, we believe that ETFs are contributing to democratising ESG investing. However, investors’ sustainability objectives differ and there is no ‘one-size-fits-all’ approach. Investors now benefit from an increasing choice of ESG ETF solutions creating opportunities to generate measurable impact towards the UN SDGs, for example through Paris-aligned climate ETFs. Our role is precisely to guide them and help them select the strategy that best meets their sustainability goals and constraints.”