ESG to Dominate ETFs in Near Future

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Stockholm (NordSIP) – In its Global ETF Study 2020, JP Morgan Asset Management  reported that demand for sustainable investment strategies continues to grow among professional investors. Rising investor interest appears to be driven by the rising understanding of the need to integrate ESG factors into portfolio risk considerations.

The study provides a comprehensive review of the exchange-traded fund (ETF) market. It is informed by a survey of 320 professional investors around the world, with average assets under management of US$40.3 billion. The report is designed to help investors benchmark themselves against their peers, position themselves for future growth and validate their existing investment decisions.

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Echoing other findings about the geographical relevance of ESG factors, the report notes that EMEA and Asian investors are much more aligned with sustainability concerns than investors in the USA and Latin America. While on average 51% of all respondents expecting strong growth, only 45% and 35% of USA-based and Latin American investors agreed, while 63% and 50% of EMEA and Asia Pacific investors agreed, respectively.

As JPM AM notes, “European investors lead the way with the adoption of sustainable investment strategies and integration of ESG funds into portfolios. US investors are less enthusiastic, perhaps reflecting skepticism over sustainable investing and the impact on returns.”

According to the investment professionals surveyed by the study, ESG are the class of  ETFs expected to grow the most in the next two to three years. “ESG and thematic ETFs are key growth areas, with active ETFs seen by larger investors in particular as suitable for ESG investing,” the report notes.

“Those with higher AUMs are more likely to see active ETFs as a tool to add alpha, but otherwise active ETFs are seen as most suitable for targeted investing and achieving specific aims, such as ESG,” the report adds.

Image by Pete Linforth from Pixabay

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The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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