Proportion of 'ESG' ETFs failing to align with UN SDGs continues to grow

James Baxter-Derrington
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Over half of all ESG ETF assets are unaligned with an SDG
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Over half of all ESG ETF assets are unaligned with an SDG

The number of ESG ETFs unaligned with any of the UN Sustainable Development Goals (UN SDGs) has increased from 342 to 442 over the past quarter, as the number of funds and amount of assets aligned with an SDG remains in the minority.

The number of ESG ETFs unaligned with any of the UN Sustainable Development Goals (UN SDGs) has increased from 342 to 442 over the past quarter, as the number of funds and amount of assets aligned with an SDG remains in the minority.

The second edition of TrackInsight's ESG Observatory research revealed the number of SDGs entirely unsupported by an ETF has fallen from six to two, with only SDG 1, aiming to eliminate poverty, and SDG16, covering peace, justice and strong institutions, unavailable to passive investors.

While the number of SDGs served by fewer than five ETFs has increased to eight, the number with more than $1bn directly aligned with their targets has more than tripled, with seven goals backed by at least ten figures.

Climate action remains the most concentrated source of SDG-aligned ETF assets, with more than half of all assets (52%) dedicated to SDG 13.

Globally, inflows continue to accelerate with $56.9bn added to ESG ETFs over the three months, reflecting 28% growth in assets under management and an increase of 87 funds, bringing the total to 758.

In Europe, ESG represents more than 10% of the total assets invested in passive funds for the first time, while both APAC and the Americas continue to receive positive net flows.

MSCI remains the provider of choice for ESG indices, with 52% of global AUM tied to the firm's benchmarks, although this has fallen from 61% the previous quarter.

As with non-ESG ETFs, iShares dominates the market, holding 43% of global ESG ETF assets ($113.1bn), although it only represents 20% of the total number of funds.

First published by our sister title Investment Week