UNCTAD’s 2021 report on ESG ETFs: Looking Beyond Financial Performance

2020 has been a whirlwind of a year, bringing massive and unforeseen challenges and suffering throughout the world, as well as deep reflections for the future. Sustainability is now more than ever a global concern. This is well illustrated by the rapid development of products focusing on ESG (Environmental, Social and Governance) or SRI (Socially Responsible Investment) criteria, even in the midst of the current difficult global situation.

In 2019, the United Nations Conference on Trade and Development (UNCTAD) released its first ESG ETFs annual report with our support at Trackinsight. The report highlighted the potential of ETFs to achieve goals beyond just financial performance, such as the UN Sustainable Development Goals (UN SDG).

This year we are more than happy to continue this journey alongside UNCTAD. The 2021 report looks at the fast transition of the ETF industry towards more sustainability. This is thanks to the combined efforts of both the sell-side and the buy-side. It also underscores how our collective actions can make an impact and the challenges standing along the journey.

Key highlights of the 2021 UNCTAD ESG ETFs report:

• ESG ETFs keep growing faster than the rest of the industry. They reached a record $174 billion in assets for over 550 funds as of the end of 2020. Their growth was boosted by huge flows of $79 billion over the year.
• Europe still dominates the ESG ETF market, both in terms of funds offering and assets. Also, the distribution of ESG ETFs between emerging countries and developed countries remains markedly unbalanced.
• There was no ‘performance penalty’ for pursuing a more sustainable investment strategy.
• ETFs claiming to invest according to Sustainable Development Goals (SDG) have grown significantly. Still investors need to pay close attention to potential 'greenwashing'.
• Actions will be needed to enhance transparency for individual companies and stock exchanges. Along with supporting the growth of sustainable investing in emerging countries.

Discover more insights with the full version of the UNCTAD ESG ETFs 2021: State of the market and the potential for sustainable development (working paper) here.

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