Survey finds ETF investors anticipate a sustainable future
Friday 07 May 2021
The rise of environmental, social, and governance (ESG) investing is rapidly gaining momentum, alongside the growth in assets allocated to exchange-traded funds (ETFs).
The shift towards sustainability investing is one of the most revolutionary investment developments of our time, a transformation that will shape the future for successive generations. The year of 2020 saw a peak in the surge towards ESG investing, in index management as well as active management with €42bn inflows into the European ESG ETF market in 2020 versus €17bn in 2019 .
To explore the increasing demand for ESG ETFs, Amundi commissioned a survey of 171 European professional investors.
ESG ETF allocations rising
ETFs are an ideal, low-cost way for investors to diversify their portfolios. Allocating assets to ESG-focused ETFs gives investors exposure to stocks that contribute towards positive impact, or excludes those that have negative impacts. Europe leads the way with 47% of ESG exchange-traded products listed in the region. Furthermore, 69.7% of investors surveyed said they are planning to increase their allocations towards ESG ETFs within the next year.
Aligning investments with personal or corporate values stood out in the survey as the primary reason for investors allocating assets to ESG (77.3%), ahead of driving performance (50%) and risk management (48.5%).
Changing times: ESG performance and asset allocation
Whether or not investors have to sacrifice performance to invest sustainably has become a fiercely debated topic, yet our survey shows 84.9% of investors believe that ESG investing does not equate to throwing away basis points.
Additionally, as investors transition to more sustainable solutions, there are many possibilities to align performance with sustainability profile.
Whether addressing their individual values, managing sustainability risks, seeking to generate impact or using ESG as a factor to drive sustainable performance; there is no one-size-fits-all approach to incorporating ESG into portfolios. Traditionally a niche thematic holding, ESG is moving towards core allocation within portfolios of the future; 67% of survey respondents view ESG as core, rather than satellite holdings. This shift to the mainstream is highlighted by the launch of ESG versions of traditional indices, such as the S&P 500 ESG and the EURO STOXX 50® ESG.
Engagement drives sustainable change
ESG ETFs can be criticised for having little to no stewardship with limited ability to influence change within the companies to which they are exposed. However, passively managed assets have the same voting rights as active, and many passive managers are among the world’s largest active managers. Investors can seek a manager with the in-house expertise and resources to vote on shareholder resolutions.
Highlighting the importance of stewardship in passive investing, 45.7% of survey respondents confirmed they would not invest in an ESG ETF from an issuer that did not consider ESG in its voting policy. Additionally 79.8% agreed that asset manager voting and engagement was either essential or very relevant.
Matching ESG exposure to values
ESG intensity ranked as the most important aspect of ESG ETF selection criteria. This underlines the demand for ESG strategies with a genuine positive impact rather than simply treating sustainable goals as a tick box exercise.
The typical ETF selection criteria seems less critical for investors when selecting an ESG-focused product.
ESG intensity ranked higher than both the index provider, and the asset manager’s ESG expertise, confirming the importance of developing solutions to match investors’ differing needs, values and constraints. The survey also addressed climate-focused ETF investing and found that 74.2% of respondents had considered climate within their portfolios. Additionally 64.9% said they want to align with the goals of the Paris Agreement.
Download the full report here to align with the goals of the Paris agreement. To learn more about our approach to responsible investing, and our range of ESG ETFs, visit our Responsible Investing page.