Investors are adopting ESG with Record Inflows

“Over $19 billion has flowed into ESG ETFs this year, bringing the total to over $40 billion,” Luke Oliver, head of index investing for the Americas at DWS Groupl said. “Just to put that in some context, there was less than $8 billion in inflow last year and prior to that the flows were very scant.”

$19 billion figure is a record for ESG-based exchange-traded funds, which have seen “persistent” inflows in 2020 despite the market’s sharp, coronavirus-fueled downturn earlier in the year.

“Investors are adopting this … less so as a satellite, very specific position, but as something that they’ll put at the heart of their portfolio,” Oliver said.

He added that one of DWS Group’s ESG funds, the Xtrackers S&P 500 ESG ETF (SNPE), has started to outpace the S&P 500 itself year to date. SNPE’s top holdings are Apple, Microsoft, Amazon and Facebook.

“If you look back onto BlackRock’s Larry Fink, this has been one of his initiatives and he has said that the top issue for investors has been sustainability. They have [$]7 trillion in assets, so, if someone like a BlackRock starts to dictate direction of the overall market, the rest of the market will follow where he is leaning,” Steve Grasso, director of institutional sales at Stuart Frankel said.

“If you look back onto BlackRock’s Larry Fink, this has been one of his initiatives and he has said that the top issue for investors has been sustainability. They have [$]7 trillion in assets, so, if someone like a BlackRock starts to dictate direction of the overall market, the rest of the market will follow where he is leaning,” Grasso said.

Beyond that, the energy sector’s struggle in recent years been a telltale sign of investors’ changing preferences, Grasso said. The Energy Select Sector SPDR Fund (XLE) has lost more than 44% in value this year and nearly 45% over the last five years, one of the very few ETFs that’s actually down on a five-year basis.

Reference

CNBC, 2020-09-19, “ESG Sees Record Inflows amid Pandemic.  One Leading Issuer on the theme’s Staying Power.”