Retail ESG Products Show Substantial Growth from a Small Base

Retail ESG Products Show Substantial Growth from a Small Base

November 2021

Investors have been steadily flocking to environmental, social and governance (ESG) assets since the first quarter of 2020, as a global pandemic and increasing evidence of climate have put these issues in the spotlight. Despite the sharp market downdraft of the early months of the pandemic, sustainable investments have maintained their decade-long growth trajectory, especially as financial assets have regained some equilibrium over the past year: Assets under management (AUM) for ESG themes among national broker-dealers rose from 1.0% market share in Q3 2019 to 1.6% market share in Q2 2021, with market share up each quarter.

ESG assets still make up only a fraction of the assets in mutual funds, ETFs and separately managed accounts, but they are showing significant growth.

By looking at activity across three investment vehicles – exchange-traded funds (ETFs), mutual funds and separately managed accounts (SMAs), we can examine in more detail what’s driving this growth and anticipate what investors can expect going forward.


 

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