One in 10 European professional investors rate the current ESG offering in the fixed income ETF market as poor, and a further 29 per cent describe it as average. Just 7 per cent believe it is excellent, with the remainder claiming it to be quite good.
This is according to research from European ETF provider Tabula Investment Management Limited with professional investors based in the UK, France, Germany, Italy and Switzerland who collectively manage over USD140 billion in assets.
In terms of how the fixed income ESG market could improve, 60 per cent of professional investors surveyed say they would like to see more innovative products available. This is followed by 54 per cent who would like to see better coverage across different fixed income asset classes, and 44 per cent who want greater transparency. Four in ten want greater choice of fixed income ESG ETFs.
In relation to which asset classes within the fixed income space could see new or better ESG ETFs, 62 per cent cite corporate credit, followed by 39 per cent who say high yield credit and 39 per cent who highlight emerging market exposure.
Commenting on the research findings Michael John Lytle, CEO of Tabula, says: “Our research shows there is much room for improvement in the range of ESG fixed income ETFs. At Tabula, we are working hard to offer unique fixed income ETF solutions with a strong focus on ESG, innovation, and diverse exposures.
“Almost 70 per cent of our current ETF AuM is in ESG (EU SFDR Article 8) or climate (EU SFDR Article 9) ETFs, which helps explain why our group assets under management have more than doubled in the last twelve months from US$440 million to US$725 million, while the European fixed income ETF market as a whole shrank by 7 per cent.
“We are in the process of launching several new funds and exploring how to address investors’ needs and tackle the current gaps in fixed income solutions. Every time we propose a new fund to clients, they share with us five other challenges facing their fixed income portfolios. It is a very dynamic environment, ripe with needs and opportunities.”