COP27 impact on markets and SDG investing

The UN Climate Change Conference is an annual event where world leaders come together and discuss the world’s collective climate goals as agreed in the Paris Agreement and the Convention. This year’s conference, COP27, is being hosted in Egypt from November 6th to 18th. At the conference, leaders and delegates of 198 countries that signed the UN Framework Convention on Climate Change will focus on five key issues: nature, food, water, industry decarbonization and climate adaptation. In this article, we share ways you can take part in bettering our world by supporting the UN’s Sustainable Development Goals (SDG) through investing.  

What’s the impact of COP27 on the market? 

With sustainability understandably top of mind for many investors this week, ESG investing takes the center spotlight. Overall ESG ETFs only represent around 4.5% of total ETF assets under management (AUM) which equals $373.5 billion. In terms of year-to-date (YTD) and week-to-date (WTD) inflows, ESG-focused strategies represent 8% ($51 billion) and 6% ($549 million) of total ETFs assets, respectively. 

What’s the impact on ETFs aligned to the UN’s Sustainable Development Goals (SDGs)?

The UN’s Sustainable Development Goals (SDGs) are a collection of 17 interlinked global goals designed to be a "shared blueprint for peace and prosperity for people and the planet, now and into the future.” SDGs aim to help tackle critical global challenges such as ending poverty, taking action to fight global warming, reducing inequalities, and providing clean water and sanitation for everyone. For more insight into what SDGs are, please read this article.

In the ETF markets, SDG-aligned funds currently attracting the most flows from investors include SDG 13: Climate Action (67 million WTD), SDG 7: Affordable and Clean Energy (12 million WTD), and SDG 1: No Poverty (9 million WTD).

For investors wishing to gain exposure to ETFs following an ESG strategy, or a fund aligned to the various SDGs, Trackinsight’s screener provides an easy way to search, review and compare the broad universe of funds.  Alternatively, outlined below is a selection of ETFs related to the week’s most popular SDGs:   

Climate Action (SDG 13): 

SDG 13 aims to take urgent action to combat climate change and its impacts by limiting global warming to well below 2℃ compared to pre-industrial levels.  

• EUSRI ETF (AMUNDI INDEX MSCI EUROPE SRI PAB UCITS ETF)
• EMUSRI ETF (UBS ETF – MSCI EMU Socially Responsible UCITS ETF)
• LCEU ETF (BNP PARIBAS EASY LOW CARBON 100 EUROPE PAB® UCITS ETF)

Affordable and Clean Energy (SDG 7):

Affordable and Clean Energy (SDG 7) focuses on improving energy use efficiency and ensuring reliable and affordable energy access for everyone. It also raises awareness of the importance of clean energy.

• INRA ETF (iShares Global Clean Energy UCITS ETF)
• XLON:ISUN ETF (Invesco Solar Energy UCITS ETF)
• NRJC ETF (Lyxor MSCI New Energy ESG Filtered (DR) UCITS ETF) 

No Poverty (SDG 1):

No Poverty (SDG 1) aims to put an end to poverty by taking action to redistribute wealth and give the tools people need to get out of poverty. 

• MDBG ETF (UBS ETF – Sustainable Development Bank Bonds UCITS ETF)
• DDBB ETF (iShares $ Development Bank Bonds UCITS ETF)

Please note all data is as of 4th November 2022.