The subject matter of the features this week is almost equally split between ESG and cryptocurrencies. The two subjects are proving to be the dominant feature of this rapidly growing industry, certainly from a European perspective. We have facts at hand from PwC, from our early and exclusive view of their latest global ETF survey. The survey predicted that the European ETF industry is set to outperform the US and the rest of the world, growing by 21 per cent to reach USD2.5 trillion in 2025.
Also in Europe, according to the survey, 100 per cent of respondents expected to see significant investor demand for ESG focused ETFs over the coming years, with European ETF managers indicating that 75 per cent of their ETF product pipeline will have an ESG focus over the next three years.
There was also a significant change in sentiment compared to the previous survey in relation to ESG in some geographies, PwC noted, with the US results changing dramatically from one in 10 respondents in the previous survey indicating that they expected investor demand for ESG to rise, to seven out of 10 (70 per cent) in this year’s survey.
And back to crypto, this week we have an interview with 21Shares’ Laurent Kssis about the dramatic growth of the firm, with its assets increased to USD1.5 billion across 12 products, the largest of which is Binance which represents some USD600 million. The firm also launched two new products: the world’s first Stellar and Cardano ETPs listed on the SIX Exchange.
The exchanges have been having a good run with crypto generally, as our interview with the head of Deutsche Börse’s ETF segment, Stephan Kraus, reveals. He says that ETC Group’s bitcoin ETP, launched last June, has shown up as the most actively traded ETP in the first quarter of 2021 on the exchange. “We see a lot of interest from issuers and investors,” Kraus says. “Volumes have been continuously growing and reached a new record of EUR3 billion in the first quarter of 2021.”
And back to ESG, and another survey, this one from Bloomberg Intelligence, which predicts that ESG ETF inflows could double this year. We also have our interview with EMQQ’s Kevin Carter and Lee Stapleton who detail the firm’s evolving commitment to ESG and its challenge to existing rating policies. The firm calls on ratings agencies to examine their approach. EMQQ, an ETF invested in emerging market internet companies, falls into a lower ESG rating in several of the popular ESG rating methodologies such as that offered by MSCI or Sustainalytics, Carter says. “Ratings providers have been pushed to produce ESG ratings and rankings at an industrial scale, leading to the adoption of ‘black box’ approaches that fail to provide an accurate and fair assessment of companies and the ETFs that hold them,” Carter says. “Alibaba and Tencent do not have the same ESG impact that a state-owned oil company has, for example. Yet, they are scored in the same ESG cohort.”
The UK wealth manager A J Bell also warns on ESG, with a detailed note on the impact of S&P’s recent revisions of its Global Clean Energy Index on ETFs that follow it. AJ Bell’s Matt Brennan says that, on balance the changes are positive, but have the potential to dilute exposure to the clean energy theme, warning that S&P may make further changes to the index to include emerging market stocks and broaden the definition of clean energy businesses.
The changes highlight the fact that thematic ETF investing requires a more active approach to fund selection, the firm says.
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Beverly Chandler,Managing Editor, ETF Express
Companies in this issue
21Shares
Alger
AJ Bell
Bloomberg Intelligence
Deutsche Börse
EMQQ
Harbour Capital Advisors
iShares
LGIM
PwC
Schwab
SIX Exchange
TrueMark
VanEck