ESG demand drops among European ETF investors

ESG demand drops among European ETF investors

Flows into exchange traded funds that are focused on better environmental, social and governance (ESG) outcomes amounted to €13bn in the first quarter, less than half of the €27bn that went into them in Q4 2021, Morningstar data for Europe show.

Just 30.4 per cent of total money put into ETFs in Europe in Q1 went into ESG funds, down from the 79 per cent record high in Q4 last year.

Thematic ETFs, like ESG portfolios and other funds that also tend to come with a quality growth bias, have seen demand shrink amid the disastrous performance of recent months. Flows into these types of funds amounted to €0.6bn in Q1 2022, down from €2.1bn in the previous quarter.

Morningstar observes that this was the first quarter since 2019 in which thematic ETFs failed to attract at least €1bn of net inflows.

That is not to say that all such ETFs have been left out in the cold. With Russia’s invasion of Ukraine putting a spotlight on the need for renewables, the iShares Global Clean Energy Ucits ETF (INRG), a poster child for thematic funds, took in €459mn during Q1. The iShares Agribusiness Ucits ETF (SPAG) took in €418mn, and iShares Digital Security Ucits ETF (SHLG) and L&G Cyber Security Ucits ETF (ISPY) both took