Industry Updates

ESG indices see record growth in 2020

40% growth this year

Tom Eckett

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The record growth in ESG indices this year has never been seen before across any sector, according to Rick Redding, CEO of the Index Industry Association (IIA).

According to the IIA’s fourth annual benchmark survey, there was a 40% increase in the number of ESG indices over the past year, the highest year-on-year increase in any major index class.

This record increase, which follows a 13.9% rise from 2018 to 2019, comes amid favourable regulation in Europe and a more socially-conscious investor set.

The rapid increase in ESG indices is very much reflective of other parts of the investment industry such as the ETF space where it has been a key trend this year.

Baer Pettit, chairman of the IIA, and president of MSCI, said rapid index growth can sometimes be a reflection of competition among providers, however, with ESG, the situation is different.

“I cannot think of equivalent growth in the industry over the last 20 years,” Pettit continued. “The take up of ESG benchmarks has been seen across the investment space, most notably by larger institutional asset owners.”

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Elsewhere, there was significant growth for fixed income indices as well which have jumped 7.1% over the past one year and 15% in 24 months.

Redding (pictured) added: “There was notable growth in the ESG sector within fixed income as product issuers look to build more-diversified and ESG-compliant products.

“Delving deeper, growth in fixed income was demonstrated across the full range of index subcategories, whereas equities growth was primarily concentrated in industry/sector, thematic, and ESG-related products.”

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