ESG ETF assets surge in Europe

During the first eight months of 2020, ESG ETFs had net inflows of €19.1bn ($22.45bn), according to a report by Cerulli Associates.

ESG ETF assets in Europe reached €49.7bn ($58.3bn) by the end of August, a 69.1% increase from the end of 2019, according a report by Boston-based consulting firm Cerulli Associates.

Equity ESG ETFs accounted for around €40.4bn of the total and fixed income ESG ETFs for €9.3bn.

According to the repot, net inflows into ESG ETFs domiciled in the region amounted to €19.1bn, which is larger compared to the EUR 16.1bn figure for the whole year 2019.

“In March, at the height of the Covid-19 pandemic, the European ETF market experienced €25 billion of net outflows, yet investors continued to put assets into ESG ETFs, which saw €700 million of net inflows during the month,” Fabrizio Zumbo, associate director for European asset management research at Cerulli, said in the report.

“Although these products still represent a small proportion of the European ETFs ecosystem, going forward they are expected to receive more interest from investors and asset managers are having to keep up with clients’ evolving demands,” he added.

However, the report noted that exclusions and negative screening are likely to be less popular with ETF issuers in Europe. According to a survey conducted by the firm, only 54% and 46% of ETF providers respectively expect demand for these approaches to increase in the coming 12 to 24 months.

Meanwhile, portfolios that focus on minimising carbon usage or being free from fossil fuels are set to be the most popular approach to incorporate ESG factors into ETFs for 86% of ETF issuers surveyed.