ESG ETF assets hit all-time high (2024)

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ESG ETF assets hit all-time high? ›

Assets of global environmental, social and governance exchange-traded funds jumped 22.3% to a record US$480.96 billion through the first 11 months of 2023 as investors piled into the 20 top funds, according to UK investment consulting firm ETFGI.

The shift towards CTB and PAB ETFs can be attributed to several factors. On the one hand, Regulatory Support Initiatives (RSI) and Environmental, Social, and Governance (ESG) principles have increasingly pressured companies to pivot towards more sustainable operations.

The value of assets allocated to ETF funds, which included environmental, social, and governance (ESG) goals in their strategy, increased markedly from five billion U.S. dollars in 2006 to 391 billion U.S. dollars in 2021. As of November 2023, allocated assets reached 480 billion U.S. dollars.

ESG assets are set to reach over $40 trillion by 2030 in line with our inaugural BI ESG Market Navigator study, which revealed that investor appetite remains resilient with over 85% of asset managers planning to boost ESG AUM.

Scores range from 0 to 10. Lower scores on High Water Stress Exposure metric improve the ESG score of an ETF, whereas higher scores on the Low and Moderate Water Stress Exposure improve the ESG score of an ETF. Energy Efficient ETFs can be evaluated across one metric: Revenue Exposure to Energy Efficiency.

The very popularity of ESG makes it unlikely that the market is underappreciating the risks. The rush of money into firms like Vestas, whose stock hit a price-to-earnings ratio of 534 in 2022, illustrates the risk that shares with high sustainability scores can get too expensive, leading to lower returns.

Equity ESG funds generate the best returns

While mixed allocation and fixed income ESG funds also fared better than their corresponding indices, the shortfall in returns compared to equity focused ESG funds is massive.

89 percent of investors consider ESG issues in some form as part of their investment approach, according to a 2022 study by asset management firm Capital Group.

ESG-focused institutional investment seen soaring 84% to US$33.9 trillion in 2026, making up 21.5% of assets under management: PwC report. Jakarta, 22 December 2022 - Asset managers globally are expected to increase their ESG-related assets under management (AuM) to US$33.9tn by 2026, from US$18.4tn in 2021.

Despite of current economic challenges, ESG investments have shown to increase profits by 9.1% over the last three years, making it a smart investment choice.

Is ESG worth investing in? ›

Fortunately, your financial plan may better support your ethical priorities if you focus on ESG investments. So, if environmental and social responsibility are important to you, ESG investments could be worth pursuing in the coming years, even if the returns are slightly lower than other investments.

A resounding 71% of global business leaders believe that, “Eventually, no investment decisions will be made without considering ESG.” The vast majority of respondents see ESG as an important consideration when making investment decisions in their own organizations, even among non-ESG fund managers.

Ten of the key global trends identified by ISS ESG that sustainable investors will likely be focusing on through 2024 include: The European Union (EU) has adopted regulation that will, by the end of 2024, require some commodities and products that enter the European market to be deforestation free.

Funds that invest using environmental, social, and governance, or ESG, criteria underperformed for a second consecutive year.

The survey, which canvassed opinions from 250 C-suite executives and 250 global investors, also revealed that 84% of executives see ESG as a key to a more robust corporate strategy. Additionally, 85% of investors believe that ESG investments lead to better financial returns and more resilient investment portfolios.

The largest ESG ETF is the VanEck Semiconductor ETF SMH with $16.43B in assets. In the last trailing year, the best-performing ESG ETF was USD at 195.64%. The most recent ETF launched in the ESG space was the BNY Mellon Concentrated International ETF BKCI on 12/06/21.

Investors increasingly believe companies that perform well on ESG are less risky, better positioned for the long term and better prepared for uncertainty. Companies that realign to the stakeholder capitalism agenda may have a competitive advantage over those that try to return to business as usual.

Actively managed ETFs are rising in popularity, offering investors targeted exposure and tax efficient benefits in a volatile market. In addition to tax efficiency, investors are seeking active management in certain asset classes and strategies, such as fixed income and thematic investing.

ESG is popular due to the following factors:

It helps regulators to get information and process it as well. 3. Investors are increasingly choosing to invest in companies that align with their values and goals. 4.

Under PwC's base-case growth scenario, ESG-oriented AUM in the US (the largest AWM market) would more than double from US$4.5tn in 2021 to US$10.5 tn in 2026; in Europe (already up 172% in 2021 alone) it would increase 53% to US$19.6tn.