A strong majority (83%) of institutional investors and wealth managers expect flows into environmental, social and governance (ESG) ETFs to increase between now and 2023, according to research commissioned by State Street Global Advisors.
A strong majority (83%) of institutional investors and wealth managers expect flows into environmental, social and governance (ESG) ETFs to increase between now and 2023.
The asset management firm behind the SPDR-branded line-up of ETFs also found that just over one in five (23%) anticipated a dramatic rise in ESG ETF assets over this period.
According to 63% of the research participants, a major factor behind this growth will be increasing demand from investors. This was followed by an overall increase in demand for ESG strategies, cited by 28% of respondents. One in four (25%) say demand for ESG ETFs will be driven by regulatory changes that make those strategies more appealing.
When asked which exclusions would make investors more likely to invest in an ESG ETF, 61% said weapons manufacturers, followed by 44% who pointed to fossil fuel companies. The same percentage cited organisations that conduct tests on animals.
When asked what inclusions would make investors more likely to select an ESG ETF, 66% cited sustainable energy, followed by 39% who selected habitat protection. More than one in four (26%) said an ESG ETF with a focus on diversity would increase their chances of investing in it.
“Interest in ESG investing from index and ETF providers alike has been a large focus area for some time now,” said Claire Perryman, head of ETFs for SSGA in the UK. “By contrast, the voice of the client in the ESG ETF debate has been quite muted. We know that clients prioritise ESG criteria differently and that standardised methodology for ESG scoring is currently lacking.”
“With these challenges in mind we conducted a survey to dig in to the criteria clients really want in an ESG ETF product. Our findings demonstrate that ESG investing covers a broad church and there is still progress to be made in establishing client consensus and industry best practise,” Perryman added.
SSGA commissioned PollRight to conduct a survey with 45 institutional investors and wealth managers on their views on ESG strategies and ESG ETFs. The research was conducted in April 2018.