While ethical investment is a fairly popular theme in the ETF space, it doesn’t seem to be attracting many assets from investors.
A recent survey published by Charles Schwab revealed almost half of ETF investors think aligning their portfolios with their beliefs is important, according to the Wall Street Journal
. However, only one in 10 of the respondents currently have socially responsible investments among their holdings.
ETF providers have been launching funds that select responsible investments based on environmental, social, and governance (ESG) criteria. Most are counting on demand from millennials, 60% of whom said it’s important to invest in socially responsible funds.
But out of the US$295 billion that has gone into US ETFs this year, only US$697.3 million went into socially responsible ETFs, according to data from Factset. The 60 ethical funds included themes such as religion, green technology, and index strategies that incorporated ESG factors. Asset-wise, the ESG segment currently represents a US$5.6-billion sliver of the US$3-trillion US ETF pie.
These numbers reflect a supply-demand mismatch that’s been noted before. In a July report, research firm Cerulli Associates said that only 11% of advisors report unmet demand for ESG strategies that the ETF industry is churning out.
The largest ESG ETF inflows in the US this year have gone to the nine-year-old Guggenheim Solar ETF, which drew in US$128 million to reach US$364 million in assets. Two BlackRock funds took second and third place: the iShares MSCI USA ESG Select ETF, which attracted US$80.8 million and now has assets of US$613 million; and the iShares MSCI EM ESG Optimized ETF, which gained US$45.9 million to hit the US$97-million mark in assets.
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