Investors we have surveyed expect the European market for ESGexchange-traded funds (ETFs) to continue to expand over the coming year. They showed particular interest in strategies incorporating low-carbon, Paris-aligned benchmarks (PABs). The investors surveyed also expressed renewed confidence in sustainability labels.
Our twice-yearly survey, first conducted in April 2022, monitors the evolution of the outlook and practices of European institutional and intermediary investors with regard to sustainable investment in index strategies. The latest edition in the second half of 2022 highlighted the following points:
- 66% of investors consider that the ETFs currently available on the market show real sustainability benefits such as a positive impact on ESG issues. This opinion is widely shared by Swiss investors (74%), against 54% of respondents in Italy, and by 85% of pension funds compared to 56% of asset managers.
- 67% of investors consider ESG voting and engagement policies to be robust. Active dialogue to support companies in their ESG transition was of particular note.
- Interest in low-carbon, emissions reduction or PAB-aligned strategies has risen sharply over the past six months, from 14% to 36%, with some notable disparities between countries: 48% of Swiss investors are particularly interested in this theme, compared to 20% in France. Other interesting themes include battery innovation, hydrogen and the electrification of transport, increasing from 8% to 33%.
- The three most important criteria investors use when selecting ESG ETFs are sustainability labels and certification (18%), the management company’s ESG credibility and expertise (15%) and tracking error against the benchmark (14%).
- 81% of investors expect ESG ETF assets under management to remain stable or grow over the next 12 months, compared to 91% in the previous survey. This decline may be explained by performance in 2022. The most optimistic respondents were in the UK (96%), while the least optimistic ones were in Germany (68%).
- Investor demand slowed for ETFs investing in the circular economy (26%, compared to 61% in the previous survey) and the blue economy (down to 32% from 48%), in contrast to growing demand for low-carbon and alternative energy.
In my view, the results show that investor expectations can change quickly depending on market conditions and regulatory developments.
In this changing environment, sustainable index strategies continue to attract significant inflows, particularly those aligned with the objectives of the Paris Agreement.
We see extensive scope for further growth in low-carbon ETFs and index funds, both on equities and fixed income. We have been at the forefront of ESG ETF innovation since 2008 when we became the first asset manager to launch a low-carbon ETF.
Since then, we have added to our thematic ETFs, with the range now covering biodiversity, the blue economy, green real estate, sustainable infrastructure, medical technology, green hydrogen and the circular economy.
 Using environmental, social and governance criteria
 Survey conducted in November 2022 on behalf of BNP Paribas Asset Management by Longitude, a Financial Times company. Respondents included asset managers and asset owners based in France, Germany, Italy, Switzerland and the UK.
 ESG strategies accounted for 65% of all European ETF inflows in 2022, according to Morningstar data, up from 53% in 2021.