Industry Updates

Thematic ESG ETFs ‘blurring’ the lines between active and passive

BNP Paribas survey found that 82% considered thematic ESG ETFs to be active

Theo Andrew

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The expanding universe of thematic ESG ETFs is increasingly blurring the lines between what is considered a passive and active investment strategy, a new survey has found.

Research by BNP Paribas Asset Management (BNPP AM) revealed investors increasingly considered ESG ETFs with a thematic narrative to be actively managed investment vehicles.

In fact, 82% believed thematic ESG ETFs to be active strategies, with just 18% disagreeing, according to the French asset manager’s first European ESG ETF Barometer survey of 250 investment executives.

Denis Panel, head of multi-asset and quantitative solutions and BNPP AM, said: “The results not only validate the necessary move towards sustainable indices, including Paris-Aligned Benchmark standards, which BNPP AM adopted at the end of 2021 but also show the increased use of ETFs as a means of accessing ESG themes, with the divide between what has previously been considered ‘active’ and ‘passive’ becoming increasingly blurred.”

The asset manager runs several thematic ESG products, including the BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF (REUSE) and the BNP Paribas Easy ECPI Global ESG Blue Economy UCITS ETF (BLUE).

According to ETFGI, ESG ETFs currently account for 16% of all European ETFs but investors expect this to rise over the next 12 months.

The survey found that 91% of respondents expect ESG ETFs to remain stable or increase their assets.

Furthermore, investors also take asset managers’ ESG credibility into account when deciding who to allocate to, with 57% saying reputation matters.

Last December, ETF Stream revealed BNP PAM announced it had undergone a major overhaul of its ETF range, shifting €9bn assets to ESG indices or the Paris Aligned Benchmark (PAB) with further plans to switch the whole range this year.

In an interview with ETF Stream, James Penny, CIO of TAM Asset Management, said impact ETFs are the next frontier of ESG investing noting their ability for activist investing.

“As ESG investing becomes more mainstream, we believe the new forefront of ESG investing is going to be impact and activist investing, in which investors can move into non-ESG industries such as mining and energy and use their voting power to turn the narrative in that industry around from within,” he said.

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