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BNP AM reports most investors expect European ESG ETF market to grow over 2023

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The latest BNP Paribas Asset Management European ESG ETF Barometer reveals that most  investors surveyed expect the European ESG ETF market to continue to expand over the coming year.  In particular, it shows particular interest in low-carbon, PAB-aligned strategies and renewed confidence around sustainability labels, the firm says.

The twice-yearly survey, first conducted in April 2022, monitors the evolution of European institutional and intermediary investors’ outlook and practices with regard to sustainable investment in index strategies.  The latest survey highlights the following during the second half of 2022:

Rising trends

66 per cent of investors consider the ETFs currently available on the market to show real sustainability benefits, such as a positive impact on ESG issues.  This opinion is widely shared by Swiss investors (74 per cent), against 54 per cent of respondents in Italy, and by 85 per cent of pension funds compared to 56 per cent of asset managers.

67 per cent of investors consider ESG voting and engagement policies to be robust.  Active dialogue to support companies in their transition was of particular note.

Interest in low-carbon, emissions reduction or PAB-aligned strategies has risen sharply over the past six months, from 14 per cent to 36 per cent, with some notable disparities between countries.  48 per cent of Swiss investors are particularly interested in this theme, compared to 20 per cent in France.  Other interesting themes include battery innovation, hydrogen and the electrification of transport, increasing from 8 per cent to 33 per cent.

The three most important criteria used by investors selecting ESG ETFs were sustainability labels and certification (18 per cent), the management company’s ESG credibility and expertise (15 per cent) and tracking error against benchmark (14 per cent).

Falling trends

81 per cent of investors expect ESG ETF assets under management to remain stable or grow over the next 12 months, compared to 91 per cent in the previous survey.  This decline may be explained by performance during 2022.  The most optimistic respondents were in the UK (96 per cent), while the least optimistic were in Germany (68 per cent).

Investor demand slowed for ETFs investing in the circular economy (26 per cent, compared to 61 per cent in the previous survey) and the blue economy (down to 32 per cent from 48 per cent), in contrast to growing demand for low carbon and alternative energy.

Lorraine Sereyjol-Garros, Global Head of Development ETF & Index solutions at BNPP AM, comments: “The results of the latest survey show that investor expectations can change very quickly depending on market conditions and regulatory developments.  In this changing environment, sustainable index strategies continue to attract significant inflows, particularly those aligned with the objectives of the Paris Agreement.  This underscores our strategy, started in 2008, of offering an extensive range of low-carbon ETFs and index funds, both on equities and fixed income, with assets under management now more than EUR13 billion.”

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