Alternative Investments/ESG: European Investors Prioritizing ESG Factors In ETFs (Cerulli)

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Cerulli’s survey finds that European investors are ranking various climate factors in order of their preferences.

Research by Cerulli Associates shows that European investors hold companies that minimize their carbon footprint or run fossil-free operations in high regard. They will therefore prefer ETFs that incorporate these ESG factors into their portfolios. On the other hand, negative screening and exclusions are not so important. (ETF Express)

Cerulli Associates’ survey of European investors

  • about 86% of ETF issuers in Europe believe that a focus on minimizing carbon usage or fossil-free operations is highly popular with ESG-focused investors
  • only 54% of the participants in the survey thought demand for exclusions within ESG would increase in the coming months
  • only 46% of participants thought that negative screening will become more popular soon
  • the EU’s taxonomy on sustainable finance and other such legislation will step up demand for ESG products
  • managers (and investors) are appreciating the beneficial impact of ESG on investment returns
  • European ESG ETF assets reached € 49.7 billion (US$ 58.3 billion) by August, a 69.1 % increase from the end of 2019 (Broadridge data)
  • of this, equity ESG ETFs accounted for € 14.4 billion, while fixed income ESG ETF’s accounted for € 9.3 billion

ESG inflows in 2020 continue to impress

“In 2019, ESG ETFs domiciled in Europe collected a total of € 16.1 billion of net new money from investors. With net flows of € 19.1 billion in the first eight months of 2020, last year’s total has already been exceeded,” said Fabrizio Zumbo, associate director, European asset management research at Cerulli. “In March, at the height of the COVID-19 pandemic, the European ETF market experienced € 25 billion of net outflows, yet investors continued to put assets into ESG ETFs, which saw € 700 million of net inflows during the month.”

According to Zumbo, interest in ESG ETFs is likely to be sustained in the future, even though they constitute only a small proportion of the European ETFs total.

“Going forward they are expected to receive more interest from investors, and asset managers are having to keep up with clients evolving demands,” he added.

Related Story:  Digitization And Fintechs Make Inroads Into Asia’s Retirement Funds (Cerulli)                                                  

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