Stockholm (NordSIP) – According to a study of the global index industry by Burton-Taylor International Consulting, ESG indices were the fastest growing market segment in 2019, with revenues rising by 31.3% to reach US$161.5 million in 2019.
The increased revenues are consistent with the increased popularity of sustainable investments in the aftermath of the 2015 Paris agreement and the subsequent launch of the UN Sustainable Development Goals (SDGs).
“A convergence of rising asset valuations, the trend towards passive investing strategies and record derivatives trading volumes all supported industry revenues,” said David Tabaka, an analyst at Burton-Taylor. “Index providers continued to see strong growth in 2019, with ESG and Factor indices an area that will support rising revenues in 2020 and beyond,” he added.
The same report notes that the revenues of the global index industry as a whole increased by 8.0% in 2019, reaching a record $3.7 billion. Among index providers, MSCI accounted for 24.74% of the market, followed by S&P Dow Jones Indices’ 24.66% and FTSE Russel’s 20.5%.
Offering some thoughts on the effects of the ongoing COVID19 pandemic on the index industry, Tabaka raised some concerns.“In a market downturn, I would expect asset-based fees from ETFs and mutual funds to take a bit of a hit since index providers charge a basis point fee for index licensing tied to assets under management. Price depreciation would lead to less index licensing revenue.”
However, the Burton-Taylor analyst was more sanguine about the ESG segment, which continued to outperform its traditional benchmarks in the first four months of 2020. “I expect the ESG Index segment to continue to grow and to be more sheltered in a general downturn.”