State Street Global Advisors, the asset management arm of State Street Corporation, has published new research that reveals that 83 per cent of institutional investors and wealth managers expect flows into ESG ETFs to increase between now and 2023. Just over one in five (22.5 per cent) anticipated a dramatic rise.
According to 63 per cent of the research participants, the largest factor behind this growth will be increasing demand from investors. And this was followed by an overall increase in demand for ESG strategies, which accounted for 28 per cent of respondents. One in four (25 per cent) 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 per cent said weapons manufacturers, followed by 44 per cent 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 per cent cited sustainable energy, followed by 39 per cent who selected habitat protection. More than one in four (26 per cent) 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,” says Claire Perryman, Head of ETFs for State Street Global Advisors 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.”