- The final months of 2021 saw ETF investors pile into ESG funds, with such products dominating flows
- Meanwhile, value ETFs have continued to lose ground
The fervour for environmental, social and governance (ESG) investments is often viewed as being of particular benefit to active managers, but its effect on fund sales can also be witnessed further afield. That’s evident enough from the world of passive funds, and exchange-traded funds (ETFs) in particular. Recent Morningstar data shows that a staggering 73 per cent of flows into European ETFs in the final quarter of 2021 went into ESG products. For 2021 as a whole, ESG funds swallowed up 51 per cent of ETF flows in Europe, up from 40 per cent in 2020 and 10 per cent in 2019.
A look at the 10 most popular equity ETFs in the fourth quarter (Q4) of 2021 reflects this, with five ESG products making an appearance. What’s notable is that all these acronym-heavy offerings – the global iShares MSCI World SRI UCITS ETF (SUWG) and the regional iShares MSCI USA SRI UCITS ETF (SUUS), Amundi MSCI Europe SRI UCITS ETF (ESRG), iShares MSCI EM SRI UCITS ETF (SUES) and Xtrackers MSCI USA ESG UCITS ETF (XESU) – follow ESG indices viewed as more stringent than some of their peers. MSCI’s SRI indices target the best 25 per cent of a given sector based on their sustainability ratings and tend to exclude more companies than peers.