The majority of investors incorporate the United Nations Sustainable Development Goals (SDGs) such as clean energy, climate action and gender equality in portfolios, according to a recent survey conducted by ETF Stream in partnership with Global X.
The survey, which interviewed 50 professional investors from across Europe, found 60% of respondents either “extensively” or “partially” integrate the SDGs into their portfolios.
At the other end of the spectrum, 24% responded “barely” while just 16% said they did not take the SDGs into account at all.
Source: ETF Stream
ETFs are one way for investors to align themselves with the majority of the SDGs except “no poverty” and “peace, justice and strong institutions” which are currently the only two not covered.
According to data from Trackinsight, there are 316 ETFs with $123.4bn assets under management (AUM) globally that offer exposure to the UN SDGs.
Many thematic ETFs offer specific exposure to the SDGs such as clean water, zero hunger and life below water.
Morgane Delledonne, director of research at Global X, said the SDGs are useful for investors when assessing the sustainability of a theme.
“While not developed for the investor community, the SDGs can support them in understanding which investment areas are sustainable,” Delledonne said. “They also give a common language with which to shape and articulate such an investment strategy.”
Despite the alignment with the SDGs, there was a divergence in views on the best way to gain exposure to sustainable investments. Some 30% said thematic ETFs offered the best avenue while 32% denied this and 38% said they were “unsure”.
Source: ETF Stream
This highlights the numerous ways investors can gain exposure to sustainable investments including thematic and more broad ESG and climate ETFs.
“Thematic ETFs and sustainable investing are complementary to each other in certain circumstances,” Delledonne added. “Following a sustainably-oriented theme means targeting innovative and disruptive industries that could lead to tangible improvements in certain environmental and social matters.
“As relevant industries grow, they may not only affect more positive changes for people and planet, but also provide investors with high growth prospects.”
Overall, some 50% of respondents plan to increase their exposure to thematic ETFs over the next 12 months while the other 50% will maintain the same exposure and 0% plan to decrease their exposure highlighting the direction of travel for the industry.
Source: ETF Stream
This is in align with the sharp increase in demand for thematic ETFs over the past year. According to data from Global X, thematic ETFs in Europe have $35.6bn AUM, as at the end of May, up from $7.1bn since the start of 2020.
