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.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Valerio Baselli

Valerio Baselli  is Senior International Editor at Morningstar.

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