Climate Action ETFs remain ahead

ETFs aligned to the Sustainable Development Goal (SDG) number 13 – Climate Action – led the flow receivers last week having pulled in USD$404 million of investor money. Meanwhile products aligned to SDG 7 – Affordable and Clean Energy – came in second with USD$154 million of new assets globally, followed by ETFs aligned to the SDG 6 – Clean Water and Sanitation – with USD$32 million. All four of the ESG investing strategies, ‘General Integration’, ‘ESG Thematic’, ‘Best-In-Class’, and ‘Exclusion Screening’ managed to attract new investments.

Sustainable Development Goals 13 and 7 remain attractive  

Investors steered their capital into Climate Action, the 7th Sustainable Development Goal (SDG), pushing it to become the flow leader among the 17 SDGs. ETFs aligned to this goal led the flow receivers last week registering USD$404 million in net inflows. The trend appears to have been driven mostly by the big cash influx experienced by the Lyxor MSCI USA ESG Broad CTB (DR) UCITS ETF (LYUSA) and the iShares MSCI USA SRI UCITS ETF (SUAS). The former follows an ‘ESG Thematic’ investment strategy where it pulled in USD$291 million over the week, whereas the latter adopts the ‘Best-In-Class’ ESG investing strategy having brought in USD$146 million of inflows over the same time period. 

ETFs investing in 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$154 million of investor capital, almost half of the previous week’s USD$304 million net inflows. 

Similarly, ETFs adopting the Clean Water and Sanitation  theme – the 6th Sustainable Development Goal – remained as attractive as the previous week. The 14 ETFs aligned to SDG 6 brought in USD$32 million of net inflows, compared to the previous week’s cash inflows of USD$43 million. 

ETFs adopting the 6th, 7th, and the 13th SDGs rallied over expectations that the U.S. Senate will pass the most ambitious climate spending package in the United States’ history after months of gridlock. The Inflation Reduction Act allocates USD$369 billion to fight climate change and improve U.S. energy security.  

ETFs in play:

• Affordable and Clean Energy ETFs
• Clean Water and Sanitation ETFs
• Climate Action ETFs

ESG investing strategies flows

All four ESG investing strategies witnessed an influx of cash over the past week. Most notably ‘ESG Thematic’ became the most appealing to investors. The strategy attracted USD$478 million of investor capital followed by ‘General Integration’ with USD$411 million. ETFs adopting the ‘Best-In-Class’ and ‘Exclusion Screening’ ESG investment strategies came in third and fourth having attracted USD$362 million and USD$101 million of assets respectively. 

Europe, which manages the majority of ESG assets, appealed the most to global investors with most of the ESG inflows (81%) over the week coming from the region while the remaining capital flowed from America and the APAC region.  ETFs domiciled in Europe recorded a whopping USD$1.09 billion in net inflows while ETFs in the APAC region and America netted USD$37 million and USD$219 million of assets respectively over the last week.

ETFs in play:

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

Data for this article is as of July 8th, 2022.