Industry Updates

ESG ETF inflows outpace non-ESG in 2020 amid watershed year for sustainable investing

ESG ETFs also saw a record 85 launches in Europe last year despite overall launches slowing

Tom Eckett

a small tree in a glass bowl

ESG ETFs in Europe saw record demand in 2020 and even outpaced non-ESG ETFs as investors turned to the ETF wrapper to gain exposure to the sustainable revolution.

According to data from Lyxor, European-listed ESG ETFs saw a record €45.5bn inflows last year versus €43.8bn for non-ESG ETFs.

ESG ETFs have proven much stickier assets than their non-ESG ETF counterparts. Highlighting this, the segment saw €730m inflows during the extreme volatility in March while European ETFs overall suffered their worst monthly outflows on record with €22bn pulled from the market.

Furthermore, ESG ETFs in Europe have not seen outflows in any single month since the beginning of 2019 pointing to the growing importance of sustainable investing.

Vincent Denoiseux, head of ETF research and solutions at Lyxor, commented: “The pandemic highlighted the impressive growth in demand for ESG investments, with ESG ETFs continuing their evolution towards becoming new market standards having been perceived as niche products just a few years ago.

“Investors are increasingly aware of their effectiveness in shifting capital at scale towards a more sustainable economy. We expect this trend to continue in the coming years."

Five top ESG ETFs

Recognising the demand, ETF issuers have launched ESG strategies at a rapid rate with 85 unveiled last year, double the number seen over the past two years combined.

This number was especially impressive considering the number of overall ETF launches slowed to 156, the lowest in the past five years.

Commenting on the huge growth in the sector, Anaelle Ubaldino, head of quant advisory at Koris International, said: “It is clear that 2020 was a long-awaited turning point for ESG ETFs.

“With competition for potentially trillions of dollars of new ESG assets heating up, we expect to see more issuers enter the ESG ETF market over 2021.”


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