Inflows into ESG ETFs reached $89 billion in 2020, three times higher than 2019.
Analysis from Bloomberg Intelligence shows flows from three ETFs from the iShares Aware range accounting for 18% of ESG and increased inflows may be driven by asset managers moving their own ETFs into model portfolios, which might not represent organic market demand. Funds from BlackRock, Vanguard, UBS and Invesco saw some of the largest inflows last year.
Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said: “This year could see inflows to climate-focused ETFs accelerate from an already record pace, driven by favourable policies, lifting the entire ESG asset class as managers add carbon criteria to an increasing number of socially conscious funds. Yet as clean-energy flows take a larger share of the pie, they increase the volatility of overall ESG investing.”
A low-carbon screen is fast becoming the norm for ESG funds, according to BI. This boosted flows to climate ETFs, which could continue to see support from favourable policies like the European Green Deal. Clean energy fund flows rose 13 times faster last year compared to 2019, while low-carbon or fossil-free funds rose five times faster.