The latest issue of investment consultant Cerulli's monthly report on trends in Europe suggests that 2020 will be a "pivotal year for ESG investing strategies and products targeting retail investors."
Cerulli notes that the EU is targeting a $100bn annual budget for climate change projects by 2025, which is up sharply from the predicted $24.3bn outlined in 2018. And there are ongoing calls for greater infrastructure investment over the coming decade to improve sustainability, it adds.
Fabrizio Zumbo, associate director, European asset management research at Cerulli, says: "Listed investment trusts are already proving popular with retail investors, with a number of trusts having raised significant amounts of money in 2019. At present in the equity space, the strategies available to investors range from broad ESG funds with exclusion policies to thematic funds, impact investing products, and strategies targeting the UN's Sustainable Development Goals."
In the fixed income space, there is growing interest in green bonds. Cerulli says it expects this market, hitherto mostly closed to retail investors, to open up as managers launch more products catering to a broader set of investors. Managers have also begun launching sustainable versions of multi-asset funds for retail investors.
Regulatory changes
Cerulli highlights 2020 as the year when the EU's sustainable finance taxonomy becomes the framework for assessing the carbon intensity of holdings. Investors wlil be able to assess which products are helping more than others to achieve the goal of net zero carbon emissions by 2050.
The EU is also expected to adopt regulations for index providers, to ensure ESG benchmark methodologies are "appropriate and do not allow for greenwashing", Cerulli notes.
"The rules are aimed at improving transparency and the ability to compare information across all benchmarks...the plans for the new rules coincide with a spike in the amount of new money flowing into passive ESG products such as exchange-traded funds."
Click here to read the full report: The Cerulli Edge—European Monthly Product Trends Edition.
