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ESG-Themed Exchange-Traded Funds, Products Attract Fresh Inflows

Tom Burroughes

1 March 2019

Environmental, social, and governance (ESG) exchange-traded funds and products listed globally gathered net inflows of $730 million during January, taking total assets invested in these channels to a record $24.71 billion, a rise of 9.97 per cent at the end of last year, figures show.

Europe-domiciled ETFs/ETPs that track such investment approaches account for more than half (56 per cent) of assets, while those in the US account for 36 per cent, according to ETFGI, a research organisation. It shows that the Asia market for these funds and products is still in its relative infancy.

(ETFs are typically open-ended, index-based funds bought and sold like ordinary shares on a stock exchange. They offer broad exposure across developed, emerging and frontier markets, equities, fixed income and commodities. Exchange-traded products are products that have similarities to ETFs in the way that they trade and settle, but they do not use an open-end fund structure.)

Wealth managers are developing ESG offerings as a way of attracting new investors – such as Millennials who are considered to be more fired up about these issues than their older peers. It seems now that almost no major wealth manager is without an ESG offering or is not developing one. To give just one example of a firm touting its work in the space, see this interview with Indosuez Wealth Management. Late last year, the consultancy, Aite Group, said that environmental, social, and governance strategies are becoming increasingly adopted by the wealth management sector.