State Street SPDR: European-domiciled ESG ETFs record 4.4 billion in inflow

State Street SPDR: European-domiciled ESG ETFs record 4.4 billion in inflow

28 februari 2024

ESG
ETF (01) actief passief

Following general flow trends, demand for ESG ETFs this year has been led by funds offering either global or US exposure.

‘European investors’ interest and further investments in ESG-focused ETFs (labelled Article 8 or 9 under SFDR), often in preference to non-ESG funds, continues to rise,’ State Street SPDR concludes today. ‘This transition is particularly apparent when investors increase their regional exposure by buying an ESG alternative to a non-ESG benchmark. So far this year, European-domiciled equity ESG ETFs have gathered $ 4.4 billion, equivalent to a fifth of net inflows for equity ETFs. Following general flow trends, demand for ESG ETFs this year has been led by funds offering either global or US exposure.’

‘Europe-focused ESG ETFs, by comparison, have been quiet. However, Europe (including the UK) may be due for reassessment as investors look to diversify exposure and become aware of the large valuation gap in the US. Investors who want to return to their home market may look for products that have the regional exposure and also meet investors’ ESG objectives.‘

‘The S&P 500 ESG Leaders Index excludes controversial business activities and favours stocks with best-in-class ESG scoring,’ responds Rebecca Chesworth, State Street SPDR ETF Senior Equity Strategist. ‘With similar industry group weights to the S&P 500, tracking error is kept low, with any difference in performance historically being to the ESG Leaders benefit. The index has proved popular given its broad allocation which maintains similar risk-return characteristics to its parent benchmark, the S&P 500 Index. It has had the highest return of all S&P ESG indices over the past three years.

The S&P 500 ESG Leaders Index methodology has resulted in overweight exposure to Information Technology and Consumer Discretionary, with both sectors more than 3% higher than in the parent index. With just 208 stocks in the index, there is a naturally higher weighting to the largest names, including Alphabet, Amazon, NVIDIA, Microsoft, Tesla, and Apple — six of the Magnificent Seven. These stocks have dominated the US stock market from excitement around the potential for AI adoption alongside rapid growth in cloud computing and automation. Unsurprisingly, the S&P 500 ESG Leaders Index was a strong performer last year, returning 30.4% versus 26.3% for the S&P 500. This was achieved with relatively lower volatility and max drawdown.’

 

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