Investors Back Sustainable ETFs

European ESG index funds are now close to €100 billion in assets under management after a flurry of new product launches so far this year

Valerio Baselli 27 November, 2018 | 7:18AM

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As sustainable investing becomes more mainstream, investors’ passive fund choices continue to grow. A total of 18 new sustainable index funds launched this year, pushing the overall number to just under 200 – and these funds now hold just under €100 billion in investors' money.

Twenty-six of 199 sustainable index funds domiciled in Europe now have more than €1 billion in assets. Nine of those funds have more than €2 billion. Within the Europe-domiciled sustainable index funds universe, there are 16 fixed-income funds and one allocation fund.

The remaining 182 sustainable index funds are equity products, which gathered €7.99 billion of net inflows in the first nine months of 2018, 17.2% of the total net flows toward equity passive products domiciled in Europe. Sustainable equity index funds managed €94.61 billion at the end of September, 9.1% of the total assets under management of equity index trackers, including ETFs included.

A total of 18 new sustainable index funds, which include 10 ETFs and eight open-end index funds,  came to market in Europe to the end of September 2018, expanding the tool kit available to ESG-conscious investors, with 10 ETFS and eight open-end index funds launching. By asset class, 17 of the 18 new launches were equity products and one was a bond fund. Xtrackers and Lyxor were the most active providers, with four new products each.

Index Funds Still Dominate

BNP Paribas, Credit Suisse, and Legal & General launched two new offerings each, followed by Amundi, Candriam, SEB, and Sparinvest with one new fund each. Among the new offerings, SEB Sustainability Global Index – which launched on February 6 – was the one that attracted the most inflows with €296 million and had the highest AUM, of €318 million, at the end of September.

According to Morningstar data, 199 sustainable index funds were available in Europe at the end of September 2018, made up of 144 open-end index funds and 55 exchange-traded funds. Fourteen of those funds are environmentally focused.

The remainder follow a broader ESG-related investment process.  As of the end of September, European sustainable index funds had €97.6 billion under management – 6.8% of the total passively managed net assets in Europe – up from €84.2 billion at the end of 2017. They attracted €8.65 billion of net inflows – 0.01% of the total net inflows into passive instruments in Europe – down from €9.3 billion on a year-over-year basis.

Currently, it seems that Europe-domiciled sustainable index products are dominated by traditional passive funds. As of September 30, 2018, we counted 144 sustainable open-end index funds that managed €88.15 billion and attracted €6.35 billion of year-to-date net inflows. On the other hand, 55 sustainable ETFs available to European investors managed €9.44 billion and gathered €2.30 billion of net inflows over the same period.

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About Author

Valerio Baselli

Valerio Baselli  is an Editor at Morningstar France and Italy.