Demand for ESG means more decisions for investors
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • A healthcare worker provides care for a COVID-19 patient in the intensive care unit at the Saint Joseph hospital in Marseille, France, on Nov. 20, 2020.
      Private equity’s health-care role draws spotlight
      John Haggerty
      Sector’s risks need to be weighed, consultant says
      Some alternative strategies struggle in first quarter following tough 2020
      Close up of Business people shaking hands, finishing up meeting, business etiquette, congratulation, merger and acquisition concept
      Cathay Innovation Partners takes minority stake in Seaya Ventures
    • Hub International continues buying spree with IBG acquisition
      Callan brings on 2 executives
      Hub International agrees to buy Plan Sponsor Consultants
      Aon names public markets solution leader
    • Michelle Dunstan
      Move to link exec pay to ESG integration growing
      The J.P. Morgan Chase logo displayed at a branch bank
      J.P. Morgan sells $13 billion of bonds in largest-ever bank deal
      John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      IACPM: Credit managers see stabilizing effect from stimulus programs
    • Interest rises in keeping retiree assets in-plan
      Joseph Healy
      Smaller DC plans place greater focus on improving financial wellness efforts
      Pentegra launches pooled employer plan
      Teresa Hassara
      Ascensus taps MassMutual alum as new FuturePlan president
    • Michelle Dunstan
      Move to link exec pay to ESG integration growing
      Focus on human rights a challenge in China
      WTW to cut carbon footprint of OCIO portfolios by half by 2030
      SEC Commissioners Testify Before The House Financial Services Committee
      SEC shouldn’t require ESG metrics – commissioner
    • Riscura stories
      Dystopian tales explore altered retirement reality
      Joel Holsinger
      Ares wants to do good – and profit – with fund
      Girls Who Invest
      MetLife plans 3 internships for Girls Who Invest scholars
      Model home
      Resmark sees niche in buying, leasing model homes
    • Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
    • Fee-cap changes will not alter DC investment in illiquids – PLSA
      Louisiana Firefighters puts Boston Partners on watch
      West Palm Beach Police picks up Lazard, PGIM Fixed Income
      Fort Lauderdale Police and Firefighters nabs William Blair to run $35 million
    • Invesco logo shown on the floor of the New York Stock Exchange
      watch video
      1:28
      Invesco’s bid for performance gains
      Ameriprise, Amundi add to their European rosters
      Larry Fink
      BlackRock tops $9 trillion on record inflows
      Morgan Stanley logo
      Morgan Stanley’s record quarter stained by Archegos collapse
    • Melrose Industries to plug U.K. pension deficit by selling assets
      Public plan funding inches up in first quarter
      Louisiana Firefighters puts Boston Partners on watch
      Corporate plan funding gets a boost from higher discount rates – Milliman
    • Sacha Sadan
      FCA taps LGIM executive for first director of ESG
      Tufts taps interim co-CIO as new investment chief
      Michael Zerda
      LaSalle picks head of debt and special situations
      Evan Siddall
      AIMCo lines up next CEO
    • Paul Morrissey
      Blackstone Growth picks managing director to lead European investing
      Bills of euro, dollar and pound currencies, among others
      Ardian closes latest buyout fund at $8.8 billion
      Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
      Vista Equity promotes 2 to leadership roles on 2 funds
    • Australia's Centuria makes takeover bid for Primewest
      CalSTRS indutrial property
      Investors hungry for industrial properties
      Tim Wang
      GLP names co-president of logistics, industrial real estate for China
      Frank Forster
      StepStone Real Estate adds managing director for Europe
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • A coin representing Bitcoin cryptocurrency in the U.K.
      Cryptocurrency and digital assets
      Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • South Carolina discloses up to $495 million in commitments
      Fonds de Reserve looking for dollar-denominated corporate debt managers
      Arizona taps BNY Mellon as custodian
      Alameda County Employees hires Parametric for cash overlay services
    • South Carolina discloses up to $495 million in commitments
      Fonds de Reserve looking for dollar-denominated corporate debt managers
      Arizona taps BNY Mellon as custodian
      Alameda County Employees hires Parametric for cash overlay services
    • Real Assets Consultant
      Passive Investment Management Services
      Active Extended Global Credit Manager Search
      Actuarial Services
    • Private real estate funds continue rebound
      Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
      Stable value retains edge over money market funds
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • BPTW cartoon
      P&I’s Best Places to Work marking a milestone
      Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • John Bakarat
      Commentary: COVID-19 and real estate debt – where investors should be looking
      Jake Remley
      Commentary: Inflation expectations vs. reality in the bond market
      Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
    • Marcie Frost
      CalPERS: Urgency underscores all areas of providing retirement security
      Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      Fixed income 2021
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • Invesco logo shown on the floor of the New York Stock Exchange
      watch video
      1:28
      Invesco’s bid for performance gains
      watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Understanding the PEP Evolution
      Divest or engage?
    • POLL: Cryptocurrency investing
      POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for April 2021
      Graphic: The state of DC plans
      Graphic: Invesco’s bid for performance gains
      Private real estate funds continue rebound
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Investing in infrastructure at the right price
      Understanding the PEP Evolution
      Divest or engage?
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. EXCHANGE-TRADED FUNDS
January 27, 2020 12:00 AM

Demand for ESG means more decisions for investors

Ari I. Weinberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Anna Hyrske
    Ilmarinen's Anna Hyrske

    Long the domain of politically minded pension funds and mission-driven foundations, investing with a keen eye on climate risk is pushing through to the mainstream, bringing with it yet another series of decisions for exchange-traded fund investors to muddle through.

    For years, ETFs focusing on environmental, social, and governance factors have been a backwater of the $4.5 trillion U.S. ETF market. But asset growth has been swift over the past year — more than $8 billion in net flows to top $22 billion in assets under management, according to research from XTF Inc. The bulk went to MSCI-indexed products from BlackRock Inc., while Vanguard Group attracted more than $1.2 billion to two FTSE-based index products launched in September 2018.

    "Previously, many products were not that interesting to us, as they could have so many ESG layers that they were no longer tracking a more mainstream index and pricing was not competitive," said Anna Hyrske, head of responsible investments at Ilmarinen Mutual Pension Insurance Co. in Helsinki. "Now we see passive products following mainstream ESG indices with very competitive pricing."

    At the end of the third quarter, €49.1 billion ($54.6 billion) Ilmarinen held roughly $2.6 billion in two products from BlackRock and DWS Group, both tracking the MSCI USA ESG Leaders index.

    Yet as the burgeoning market struggles to define itself in the face of investor demand, the Securities and Exchange Commission is reportedly bearing down for clarity in marketing. In a speech before the American Enterprise Institute last June, SEC Commissioner Hester Peirce channeled her namesake and delivered a diatribe against those "scarlet letters" — E, S and G.

    "Popular discourse has fueled the efforts of ESG instigators, which include developers of ESG scorecards, proxy advisers, investment advisers, shareholder proponents, non-investor activists and governmental organizations," she said. Ms. Peirce went on to argue that much of the material going into ESG ratings, and therefore ESG-linked indexes, come from company surveys and voluntary reports.

    Todd Rosenbluth, senior director of mutual and exchange-traded fund research at CFRA Research in New York, sees such hand-wringing on ESG ratings as simply being an extension of the indexing discussion. "We have different index providers determining what are growth or value stocks based on distinct definitions," he said. "ESG is based on data and the analysis of that data. The fact that S&P and MSCI don't have the same view on the ESG ratings of companies is not that different."


    Focus on future

    Despite the potential for regulatory scrutiny, investment firms are focused on meeting expectations of future demand — within ETFs and elsewhere. Salim Ramji, senior managing director and global head of iShares and index investments for BlackRock in New York, sees four areas where investors are evaluating ESG and sustainability-focused index products: screening out certain sectors or companies, optimizing ESG scores while tracking to market-cap-weighted indexes, focusing on "best-in-class" ESG ratings, and delivering an entire asset allocation model.

    BlackRock, which manages more than $7 trillion globally, has set a goal to manage $1 trillion in sustainable mandates by 2030, according to Mr. Ramji, from $90 billion at the end of 2019.

    While the urgency of climate change may help drive some growth, much more likely will come from increasing transparency and mainstreaming of sustainability-related disclosures as the efforts of the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures expand their reach.

    In fact, State Street Global Advisors already filed for five ETFs tracking Bloomberg indexes based on the SASB framework and SSGA's own responsibility or "R-factor" score.

    "For institutions with a robust investment office, their goals might be more precisely expressed through a separately managed account," said Noel Archard, global head of SPDR product for SSGA in Boston. Yet "as the data evolves and is consistently reported on both a company and country level, 'ESG' products will begin to feel and look more like what we now consider 'beta' products, and their utilization expanded."

    Vanguard, the second-largest ETF issuer in the U.S., which has traditionally taken a much more deliberate approach to the investment product market, has not yet revealed further plans to wade into the sustainability or ESG ETF landscape.

    But if there were an underserved market revealed by the recent trend, watch for interest (and offerings) in ESG-linked fixed-income ETFs and those investing in green bonds, with less than $1 billion in assets under management across just nine products, according to XTF.

    Related Articles
    Fink lays out BlackRock’s focus on sustainability
    S&P Global finds 60% of companies at risk from climate change
    Fed officials see climate change as pressing threat to economy
    Recommended for You
    Investors seeking out a thematic investing ride in ETFs
    Investors seeking out a thematic investing ride in ETFs
    Amundi strikes $970 million deal to acquire Lyxor
    Amundi strikes $970 million deal to acquire Lyxor
    Cryptocurrency called next great investing opportunity
    Cryptocurrency called next great investing opportunity
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    April 5, 2021 Page One

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center