ETF data provider TrackInsight has launched ESG ETF platform, ESG Observatory, on the back of the huge growth in demand for ESG ETFs observed during 2020.
The year saw ESG ETFs grow by 223 per cent to USD189 billion, and nearly 200 new listings. ESG Observatory is developed in partnership with independent ESG verifier Conser, and with support from the SDG Investors Partnership of the United Nations Conference on Trade and Development (UNCTAD).
Joseph Clements, Economic Affairs Officer from UNCTAD, explains that it is the focal point within the United Nations Secretariat dealing with trade, investment, and development issues.
“The SDG Investors Partnership is a programme we have established to promote investment for sustainable development,” Clements explains. This particular programme targets institutional investors on issues that are general and applicable to all investors, such as sustainability reporting, corporate governance and engagement.
“TrackInsight provides the ETF data for the ESG Observatory and in turn we provide advisory services on the sustainable development goals,” Clements says. “Together, we provide a simplified methodology for categorising sustainable investment strategies that is cross referenced with ESG consensus ratings provided by Conser.”
Clements says that his organisation is trying to establish the real size of the global market in sustainable investment across all types of funds.
“What’s been interesting for us is that a significant portion of [the market] is ETFs, and it’s been interesting to see how the it’s grown over the two years we have worked with TrackInsight. Last year alone the market tripled in terms of the assets under management.”
UNCTAD is interested in how financial products, like ESG ETFs, could benefit investment in developing countries. “We are focussed on institutional investors with larger portfolios that can drive change through active ownership and engagement on issues such as climate change and gender equality. Many ESG ETFs have a thematic focus, such as renewable energy, that could help reorient financial markets and support the SDGs,” he says.
“The ESG Observatory highlights the number of ETFs aligned with an SDG theme has grown fourfold in the past year, from 49 funds in 2019 to 214 at the end of 2020”.
Simon Mott, chief marketing officer, TrackInsight, comments that last year saw an extraordinary growth in ESG ETFs. “The ESG ETF industry has been around for a while, but something big happened last year. At the start of 2014 there were about 45 ESG ETFs with around USD5 billion AUM. By the start of 2019, the assets had only grown to around USD27 billion AUM across 273 ETFs. But by December 2020, assets had exploded to USD190 Billion across 545 funds.”
“ESG is a theme which currently resonates powerfully with investors but the growth in the market also reflects the power of ETFs as a distribution technology – one that more asset managers are using to deliver their ESG strategies to investors – so two trends are converging creating an extremely dynamic market. The age of ESG investing and institutionalisation is happening very quickly and we don’t see that stopping, so ESG Observatory is a free tool that investors can use to quickly navigate this market and identify the ETF that matches with their ESG goals, whatever they may be.”
