TrackInsight ESG Observatory - Clarity in the ESG Mist
Ms. Ubaldino, why has TrackInsight decided to launch ESG Observatory now?
TrackInsight has been providing data and tools on the global ETF markets for over six years and in 2020 we noticed something very significant happen. Investors suddenly started to pour money into ESG ETFs in a way that had never been seen before - over the course of 2020, assets in ESG ETFs nearly tripled to 189 billion US Dollars and over 200 new ESG ETFs were launched.
Sustainable investing has been around for some years but an annual growth of 223 percent is big news, even in the high-growth ETF industry - the data suggests the long-awaited turning point for ESG has finally arrived.
With more than 550 ESG ETFs now listed around the world, we launched ESG Observatory to provide investors with free access to world-class data, tools and research that helps them compare different ESG ETFs, select the ETF that matches their objectives and learn about the key trends and themes in the industry.
What’s driving this sudden boom in ESG?
Certainly, the effects of a raft of recent regulations around sustainability are beginning to show as large institutions increasingly embed ESG into their risk management, investment and reporting, but there is also a significant bottom up-demand from investors who either believe in the long-term performance potential for the ESG theme, or who want to make their investments work towards a better world - doing well by doing good.
Performance was also exceptional for some ESG ETFs over 2020, which gained the segment even more investor attention – 5 of the top 10 best performing ETFs of 2020 were ESG and all delivered in excess of 140 percent net return for the year.
ESG Observatory is a partnership between various organizations. What are their roles?
Yes, it’s made up of a unique triumvirate with complementary skills. TrackInsight provides an independent expertise in the ETF markets; we are close to investors and developed a good understanding of what information they need when they are choosing an ETF. But ESG is a highly specialised area and to offer investors in-depth ESG insights on ETFs we brought in sustainability experts, so in mid-2019 we began a partnership with Conser, a well-known independent ESG verifier based in Geneva.
With Conser’s support and consensus methodology, TrackInsight provides holding based ESG ratings and risk analysis for the 6,500+ ETFs we have in our database. One of the biggest issues for investors looking at ESG is having to wade through a mist of competing rating methodologies, but Conser’s unique consensus-approach means investors have an objective unbiased framework against which to measure the ESG quality of their ETF.
Also, with hundreds of different ESG ETFs around, the simple question many investors are asking is «How will my investment help?»
The 17 UN Sustainable Development Goals (SDGs) provide an outstanding, internationally accepted and truly independent framework to help us answer that question and we are delighted to have the support of UNCTAD - the United Nations Conference on Trade and Development - to map the universe of ESG ETFs against the SDGs. By doing so, investors can now easily identify which ETFs are contributing to a specific sustainable goal. This is the first time this analysis has ever been done and is a unique insight for investors who want their portfolios to contribute to clearly-defined sustainable outcomes.
What’s Next for ESG ETFs?
We have had a tremendous reception since we have launched ESG Observatory which reflects the huge demand for information about sustainable investing and we see no sign of this slowing down. In fact, we expect about 50 percent of institutions planning to increase their use of ESG ETFs in 2021, so the market has a long way to grow yet.
Competition for assets is also heating up and we see no slowdown in product issuance - many asset managers are looking to introduce or grow their ESG offering and many are turning to ETFs as a powerful and efficient way of distributing these ideas.
Given the dizzying pace of change, we think ESG Observatory has an important part to play by providing a refuge from the greenwash and marketing and making the process of comparing and selecting ESG ETFs much more straightforward for professional and individual investors.
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Anaelle Ubaldino joined TrackInsight in 2015 through Koris International - the group’s financial investment advisory branch. Now she manages the team of ETF analysts and oversees the company’s ETF research and investment advisory activities. She obtained a MSc in Finance from EDHEC Business School in 2015.