European-listed ETFs saw a marked boost in demand during Q3, with inflows rising to $138.6bn for the year-to-date, up from $59.1bn at the end of Q2. Amundi nearly doubled its inflows, securing $8.6bn after cutting fees earlier in June.
BlackRock led the pack with $26.2bn in new assets, boosting its total AUM to $964bn, while DWS followed closely with $8.4bn, driven by strong demand for equal-weight strategies. Vanguard also posted its strongest month since entering the market in 2012.
Meanwhile, ARK Invest and Legal & General Investment Management faced outflows, with LGIM’s struggle reflecting a broader retreat from ESG investments.
ESG ETFs fund Aramco via private equity loophole
Some ESG fixed income ETFs have unintentionally financed Saudi Aramco by buying bonds issued by private equity vehicles, exposing gaps in ESG data and rating systems.
Aramco – often excluded by ethically minded investors – sold stakes in its pipeline businesses to special purpose vehicles (SPVs) which financed the deals by issuing debt, allowing Aramco to effectively secure funding from ESG investors through.
Bonds issued by these SPVs avoid the scrutiny placed on Aramco itself, making their way into ESG indices. The loophole highlights ongoing issues with ESG transparency, as similar cases involving fossil fuel companies have surfaced, sparking questions about ESG investment strategies and ethical standards.
ESG creates shareholder value
London Business School finance professor Alex Edmans argued that ESG can create more shareholder value than focusing solely on financial measures.
Speaking at the ETF Stream’s ESG ETFs Workshop 2024, he noted ESG investments often provide long-term benefits that aren't captured by traditional financial calculations.
Against this backdrop, Edmans emphasised the need to move ESG from "niche" to mainstream, as it drives long-term value for both companies and society.
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