Stockholm (Ekonamik) – Environmental, social and governance (ESG) investing has been gaining in popularity among investors in recent years, which has prompted asset managers to ramp up the pipeline of new fund launches with sustainable mandates. The universe of exchange-traded funds (ETFs) with a sustainability focus has boomed recently, with investors enjoying a rapidly-increasing range of choices in the sustainable ETF space.
According to Morningstar’s 2019 European Sustainable Funds Landscape, the sustainable ETF universe attracted over €5 billion in net inflows in the first half of 2019, outpacing the level of inflows for the entire 2018. There are 102 ESG-focused ETFs available to European investors, according to Morningstar, of which 88 are diversified equity funds and the remaining constitute bond funds. In the first half of the year, a significant portion of capital flowing into the sustainable ETF space went to the product suites of iShares and UBS. The two ETF providers attracted more than €1.74 billion and €1.64 billion in net inflows during the six-month period, respectively.
In terms of assets, passive funds account for 17.7% of the European sustainable fund market, up from 10% five years ago. ESG ETFs, meanwhile, represent 15.7% of passive sustainable assets, compared with 6.5% five years ago. The universe of sustainable ETFs in Europe continues to expand at a rapid pace, with the industry’s expansion moving too fast for most industry observers to keep up. Nonetheless, here are some major announcements and developments in the European space of ESG ETFs in the past several months.
According to NordSIP, the first European ETF focused on ESG investing to reach €1 billion in assets under management was the UBS ETF – MSCI World Socially Responsible UCITS ETF. According to Bloomberg data quoted by UBS, the ETF exceeded €1.23 billion in July of this year. “This milestone represents a further confirmation of our commitment to meet the increasingly sophisticated needs of investors,” commented Florian Cisana, Head Passive & ETF Specialist Sales Strategic Markets EMEA at UBS.
Just recently, UBS Asset Management has launched three new ESG ETFs to meet the growing investor demand for sustainable investing. In partnership with STOXX, MSCI, and J.P. Morgan, UBS offers investors the opportunity to get ESG-adjusted exposure to the EURO STOXX 50, the MSCI China ESG Universal Index and investment-grade U.S. dollar-denominated emerging market debt. “Being a leader and innovator in sustainability-focused ETFs, UBS Asset Management has now further expanded into new markets and segments, widening considerably the ESG investment opportunities for investors,” Florian Cisana tells NordSIP. “The demand for sustainable investments is accelerating, and it is of great importance to us to help investors in achieving their ESG goals, whilst being invested across geographies and diversified across asset classes. This newly launched series of three ETFs certainly opens a new set of opportunities for passive sustainability-focused investors.”
Paris-based asset manager Amundi, meanwhile, has expanded its socially-responsible investment line-up with the launch of an ETF that provides exposure to short-dated Euro-denominated corporate bonds from issuers with ESG credentials. The ETF debuted on Euronext Paris, according to ETF Strategy, but is anticipated to cross-list on other major European exchanges. “Having been a pioneer in responsible investment, Amundi continues to expand its SRI offering,” Fannie Wurtz, Head of Amundi ETF, Indexing & Smart Beta, comments on the launch. “This launch demonstrates our commitment to meet the growing investor demand for passive solutions with ESG filters at very competitive prices.”
In cooperation with Legal & General Investment Management (LGIM) and Foxberry, Finnish pensions insurance giant Varma has just launched an ETF that focuses on European equities with strict ESG criteria. Varma Investment Director Timo Sallinen told AMWatch that the lack of investment vehicles that lived up to their ESG criteria and with sufficient asset volume prompted the insurance giant to join forces with LFIM and Foxberry to develop the ETF. “When you do not find products that you would need to realize your aims, you have no other choice than to take the initiative yourself and plan and launch the product yourself,” Sallinen tells AMWatch.