The rapid pace of growth in Europe’s ESG ETF market is set to continue over the next year, according to research conducted by BNP Paribas Asset Management.
BNP Paribas will release its European ESG ETF Barometer on a bi-annual basis.
The French asset manager has debuted the first edition of its European ESG ETF Barometer, a bi-annual survey monitoring changes in investors’ sustainable investment outlook and practices.
The study canvassed the views of 250 investment executives at insurers, pension funds, asset managers, and wealth managers across France, Germany, Italy, Switzerland, and the UK, assessing their perspectives on the evolving ETF landscape in regards to ESG integration, thematic opportunities, the regulatory environment, and ESG investment risks.
The survey found considerable optimism regarding the outlook for ESG ETFs with 91% expecting assets held in ESG ETFs to remain stable or grow over the next 12 months. Respondents in the UK (96%) and Italy (96%) were the most positive about the future of the segment.
When asked what the most important criteria are when selecting sustainable ETFs, more than half (57%) of those surveyed ranked the credibility and ESG credentials of the fund’s sponsor among their top three choices. ETF labels and certifications were also influential, especially to German and Swiss investors, according to 46% of respondents from those countries.
Investors are keen to see a greater focus on ESG engagement and voting practices, particularly in regard to social issues – 43% of respondents want more action on employee rights and 42% on board diversity. Wealth managers, however, were more focused on environmental issues with 55% demanding increased disclosure about climate impact.
The survey uncovered notable differences between client type and country when it came to ESG integration preferences. A thematic approach to ESG investing was found to be a key approach for Swiss (72%) and UK (68%) respondents but less so for French respondents (36%), while 63% of wealth managers cited the importance of impact investing and 57% of asset managers considered engagement and stewardship as the best method.
When quizzed on which ESG investment themes were most appealing, almost two-thirds (61%) of investors noted the circular economy is likely to be their primary focus over the next 12 months. Some interest was also shown in ocean health and education investment themes.
Interestingly, the survey found that thematic ESG ETFs are increasingly being thought of as active investments due to the nicheness of these funds’ underlying indices. Only 18% of respondents disagreed with the statement that such ETFs are active strategies.
Commenting on the survey’s findings, Denis Panel, Head of Multi-Asset, Quantitative & Solutions at BNP Paribas Asset Management, said: “The launch of our European ESG ETF Barometer provides us with valuable insights into the way in which investor preferences for thematic ESG ETFs are evolving.
“The results of the first survey highlight the growing appetite for this asset class. BNP Paribas Asset Management has ambitions to further develop as a key player in index solutions integrating ESG and decarbonization.
“The results not only validate the necessary move towards sustainable indices, including Paris-Aligned Benchmark standards which we adopted at the end of 2021, but also show the increased use of ETFs as a means of accessing ESG themes with the divide between what has previously been considered ‘active’ and ‘passive’ becoming increasingly blurred.”