Stockholm (NordSIP) – As the popularity of sustainable assets continues to increase, the pressure for asset managers to satisfy investor demand leads to a rise in the share of ESG products they offer their clients. According to recent information released by UBS Asset Management (UBS AM), the Swiss bank’s ETF offerings is an example of this trend. Of the total US$100 billion in assets under management (AUM) under the remit of its ETF range, over a third are qualified as sustainable .
ETF Offering Growth
Having launched its first ETFs in 2001, UBS AM now offers a range of 130 ETFs across equities, fixed income, commodities, and alternative strategies, with AUM. ETF AUM grew at an annual rate of 27% over the last five years, expanding from US$30 billion to US$100 billion in that period.
“The growth of our ETF business to US$100 billion is testament to our focus on investors’ needs and the breadth of our offering, providing a transparent and flexible way to invest across key markets and assets classes,” Clemens Reuter, Global Head of ETF & Index Fund Client Coverage at UBS AM, said.
“Our commitment to sustainable investing across our indexing business has helped UBS AM grow to become the second-largest European manager of indexed assets. ETFs are a core part of our offering and we continually seek to develop innovative new products and solutions in index management for our clients,” Ian Ashment, Head of Systematic & Index Investing at UBS AM added.
Sustainable ETFs Dominate
According to UBS AM, sustainable ETFs out-paced other ETFs, reaching US$35 billion and making UBS the second-largest European provider in this category. In 2021 UBS AM launched 17 new sustainable ETFs, including a full suite of Paris-aligned benchmarks and collected more than US$10 billion with ETFs classified under Article 8 of the EU’s Sustainable Finance Disclosures Regulation (SFDR).
Florian Cisana, Head UBS ETF & Index Fund Sales Nordics at UBS AM, explains that the sustainability ETF market is still largely equity-driven. “Our assets under management split reflects that picture, with approximately US$30 billion in sustainable equity and circa US$5 billion in fixed income,” Cisana explains.
“Within equity we have witnessed continuous demand in our family of SRI products, especially after the benchmark change done at the end of 2020 that further enhanced the methodology. A large portion of the equity inflow also went into our enhanced ACWI ESG Universal Low Carbon Select, with around US$2.2 billion USD NNM in 2021,” Cisana says.
“Even if relatively smaller, in 2021 we’ve seen continuous interest from client in the fixed income space, both on sustainable corporates and sustainable sovereigns. In addition, we have seen how the fixed income market can be well-suited for thematic and impact investing exposures like our UBS Sustainable Development Bank Bnds ETF which gathered approximately US$1 billion NNM this year alone,” Cisana continues.
Sustainability – A Must Have
“Investing in sustainability is now a must-have rather than a nice-to-have, across all the geographies in Europe. While in the Nordics clients are generally well-established ESG investors, in other countries clients are still relatively inexperienced and are still making the first step in the sustainable-investing space. In this sense, we do believe that our shelf, which offers ‘different shades of green’, has all the building blocks to offer solutions the clients are looking for,” Cisana argues.
“Some funds use a light-green screening that excludes only controversial activities and ESG laggards (e.g. ESG Universal Low Carbon Select), while other products have a dark-green approach that selects only highly rated companies and excludes a broader list of controversial activities (e.g. SRI Low Carbon Select),” Cisana explains.
Opportunities and Challenges
Going forward, Cisana sees climate investing as the big opportunity upcoming theme, while market fragmentation and heterogeneous labels could undermine the sustainability agenda. “Climate investing has reached the top of the agenda for many investors. For this reason, in 2021 we have expanded our ‘shades of green’ to include also a family of funds that is aligned with the Paris-agreement (PAB),” he says.
“Fragmentation and the wide offering of sustainable solutions, with various labels and too many solutions quite similar one another is a challenge. In this sense, UBS ETFs has more than 10 years experience in sustainability and we aim to guide our clients on their sustainability journey,” Cisana explains.
“Through the years UBS ETF has always been at the forefront of innovation, and our ability to constantly to improve and enhance our shelf allowed us to experience growth rate higher than those of the rest of the market. In addition, we believe that the main driver of our asset growth, which are core beta, customization and sustainability, are here to stay. Therefore, we are confident that UBS ETF will continue to grow and play an even more important role in the future,” Cisana concludes.