Record Assets In ESG ETFs
Assets invested in environmental, social, and governance exchange-traded funds reached an all-time high in November last year according to ETFGI, an independent research and consultancy firm covering trends in the global ETFs/ETPs ecosystem.
ETFGI said in a report that assets listed globally in ESG ETFs reached a record last year.
Assets invested in Environmental, Social, and Governance #ESG #ETFs and ETPs listed globally reaches a new record of US$52.35 billion at the end of November according to @ETFGI's new report https://t.co/u7YPKbiTLj Europe leads with 118 ESG products and 54% of the assets.
— Deborah Fuhr, ETFGI (@deborahfuhr) December 30, 2019
The report continued that the number and diversity of products has increased steadily since the launch of the first ESG ETF/ETP in 2002, the iShares MSCI USA ESG Select ETF. At the end of November last year, 269 ESG ETFs/ETPs were listed globally with seven new ESG funds launched during the month.
“Substantial inflows can be attributed to the top 20 ETFs/ETPs by net new assets, which collectively gathered $1.48bn (€1.32bn) in November, “ added ETFGI. “JPMorgan Global Emerging Markets Research Enhanced Index Equity ESG UCITS ETF gathered $201.25m alone.”
Exchanges have also launched ESG derivatives contracts in response to investor demand.
Nasdaq introduced futures based on the OMXS30 ESG Responsible index, developed in cooperation with Nordic asset managers, in October 2018. A year later Nasdaq said trading of the ESG future had reached one million contracts in October 2019, with more than 80% of volume from institutional clients.
Alessandro Romani, head of European equity derivatives at Nasdaq, told Markets Media at the time: “Sustainability is of paramount importance in the full chain of the investment process. The lack of ESG-screened index futures had become a pain point for some clients.”
Magnus Linder, responsible for derivative trading at asset manager Swedbank Robur, said in a statement: “Money raised through OMXS30 ESG has ensured that one of our index funds (Access Sweden) is fully invested and has money for cash withdrawals – a very real example of how sustainable investments create real value for investors.”
Deutsche Börse’s Eurex launched three ESG futures in February last year based on STOXX benchmarks and covering ESG exclusions, low carbon and climate change – and subsequently began trading options based on STOXX Europe 600 ESG-X Index.
— Eurex (@EurexGroup) December 17, 2019
Eurex said last month that ESG derivatives had traded half a million contracts with a nominal value of €7bn, shortly before the quarterly expiration date on which many traders have to roll their exposure.
Vassilis Vergotis, head of strategy and product design – equity, index and digital assets, said in a statement: “Liquidity is of greatest importance and we are therefore very happy about the response from the market, especially with 55% of the flow coming from end-clients and asset owners.”
Last month Eurex also announced an expansion of its ESG derivatives strategy with the launch of contracts based on various global, pan-regional and regional ESG index benchmarks next month.
🌐Screening for the climate: In February, Eurex will list futures on our #STOXX USA 500 ESG-X Index. The first listed derivatives covering the US market that include a screening for thermal-coal mining and coal-fired power plants. More in #PulseOnline. https://t.co/rsUqFAut5V pic.twitter.com/CGA6CRdGqA
— STOXX Ltd. (@stoxx) December 12, 2019
“Alongside the launch of STOXX USA 500 ESG-X index futures that will complement the existing STOXX product suite, the new products will use MSCI’s ESG screened index family,” added Eurex. “These will cover USA, World, EM, EAFE and Japan regions. The extended offer will be available before the March 2020 roll.”
In the US, CME Group also launched ESG contracts – mini S&P 500 ESG Index futures – in November last year.
— CMEGroup (@CMEGroup) November 18, 2019
The constituents of the S&P 500 index are filtered for materially participating in certain industries (e.g. tobacco, controversial weapons) and for possessing a low score in United Nations Global Compact. In addition, companies with an S&P DJI ESG Score that falls within the lowest 25% of ESG scores from each GICS Industry Group are also excluded.
The 10-year licensing agreement allows for the launch of 37 futures and options contracts in Hong Kong.
Trading volumes increased outside the US.
The ISDA-Clarus RFR Adoption Indicator shows monthly RFR trading activity in interest rate derivatives.
The ISDA e-contract opinions will be updated to cover securities financing transactions.
Applicants from Asia, Middle East, Africa and South America are particularly welcome.