Assets in dedicated ESG ETFs fall in October

The net asset total invested in globally-listed ESG exchange traded products was down on the previous month

Investments in sustainable exchange traded products fell in October amid investor concerns over potential US treasury rate hikes and on-going trade disputes in Europe and across the pond.

Independent research and consultancy firm ETFGI has revealed globally-listed Environmental, Social, and Governance (ESG) ETFs and ETPs saw net new assets of US$1.06 billion in October, down 2.91 per cent from the end of September 2018.

Deborah Fuhr, managing partner and a founder of ETFGI, said: “Few markets managed to avoid the October sell off, as investors grew jittery at the prospects of further rate hikes from the US treasury and any hope of resolutions to trade disputes appeared to be diminishing, be it in Europe or the US. Developed and developing markets saw similar declines during the month.

She added: “Aside from the US, where strong year-to-date performance cushioned the fall, October pushed many indices deeper into negative territory for the year. The S&P 500 fell 6.84% over the month, retaining a 3.1% gain year-to-date, while European markets fell 7.82%, bringing year-to-date decline to 9.56%. EM markets down 7.60% and Frontier markets down 3.36%, bringing year to date declines to 15.07% and 10.68%, respectively.”

When compared against all ETFs and ETPs listed globally, ESG-focused products have seen assets increase 25.9 per cent year-to-date (October 31, 2018)

Adrian Lowcock, head of personal investing at Willis Owen, said: “This is not too surprising the sell-off in October lead investors to become risk adverse and wary of all equity markets. Whilst the long term benefits of having an ESG filter on investments is starting to permeate through the broader market this does not stop them from being sold, or indeed avoided, by investors when short term volatility hits markets.

“When investors get spooked they sell first and ask questions later. The benefits of ESG approach and this area of the market are much more about the long term as that is where the value can be added.”

Lowcock added: “It is also worth noting the trend over the longer term is more obvious, whilst this is arguably coming from a lower base then other ETFs areas the trend is clearly one of growing investor interest and demand for ESG which we expect to grow over time as well.”

At the end of October 2018, there were 200 ESG classified ETFs/ETPs, with 447 listings, assets of $21.85 Bn, from 60 providers listed on 25 exchanges in 23 countries.