Climate action and affordable energy reign over the ESG universe 

ETFs tracking the 13th Sustainable Development Goal (SDG) – Climate Action – topped the ESG flow charts for the week having pulled in USD$557 million of investor money. Meanwhile, products adopting the 7th SDG – Affordable and Clean Energy – came in second with USD$98 million worth of new investments, followed by ETFs aligned to the SDG 9 – Industry, Innovation, and Infrastructure – with a relatively minimal USD$5 million. All ESG investing strategies, ‘General Integration’, ‘ESG Thematic’, ‘Best-In-Class’, and ‘Exclusion Screening’ attracted new capital.

SDG 13 and 7 lead ESG investing  

Global investors demonstrated their commitment to environmentally oriented solutions, pouring capital into investments aligned to the Sustainable Development Goal (SDG) number 13, Climate Action, pushing it to rank first in the SDG universe, in terms of fund flows. The impact of the Inflation Reduction Act is one potential reason for this trend, as the legislation allocated USD$369 billion to energy security and climate change. The funds are geared toward industrial policy providing incentives for companies that build electric vehicles, heat pumps, and solar panels. Consumers also benefit from the Act as it raises tax credits for solar installation from 26% to 30% effective immediately. Tax credits for geothermal heating and for those looking to invest in energy efficiency will kick-in in later years. Products tracking SDG 13 led the flow receivers for the week between August 29th and September 2nd registering USD$557 million in net inflows. 

ETFs holding securities aligned to the 7th SDG, Affordable and Clean Energy, were the second most appealing to global investors last week. They attracted a total of USD$98 million of investor capital, reversing the previous week’s USD$37 million outflows. The Japanese Prime Minister Fumio Kishida signaled the Asian nation’s return to nuclear power to stabilize energy supplies and enhance energy security while reducing carbon emissions. He ordered the restart of Japan’s idle nuclear plants and shifted the focus to developing next-generation reactors. The four top-performing ETFs in the ESG universe were in fact aligned to SDG 7, and more specifically tied to uranium. The Sprott Uranium Miners ETF (URNM) and the Horizons Global Uranium Index ETF (HURA) rose 3.12%, while the Global X Uranium ETF (URA) jumped 1.52% and the Global X Uranium UCITS ETF (URNU) 1.06%.   

Similarly, ETFs adopting the Industry, Innovation, and Infrastructure – the 9th Sustainable Development Goal – reversed the previous week's outflows. The 42 funds brought in USD$5 million of net inflows, compared to the previous week’s outflows of USD$40 million. 

ETFs in play:

• Affordable and Clean Energy ETFs
• Climate Action ETFs
• Industry, Innovation, and Infrastructure ETFs

Summary of flows into ESG investing strategies 

All four ESG investing strategies witnessed an influx of cash over the past week. Most notably ‘General Integration’ was the most appealing to investors. ETFs following this strategy racked up USD$756 million of investor capital, followed by funds investing according to ‘ESG Thematic’ with USD$183 million. ETFs adopting the ‘Best-In-Class’ and ‘Exclusion Screening’ ESG investment strategies came in third and fourth having attracted USD$88 million and USD$31 million of assets respectively. 

ESG ETFs across all regions attracted a total of USD$1.06 billion of capital.  Europe, where the majority of ESG offerings are domiciled, took the greatest share with inflows of  USD$921 million (88%) over the last week, while ETFs in America and the APAC region netted USD$70 million and USD$58 million of assets respectively.

ETFs in play:

• Best-In-Class ETFs
• ESG Thematic ETFs
• Exclusion Screening ETFs
• General Integration ETFs

Data for this article is as of September 2nd, 2022.