Passive ESG ETF inflows slowed in first half, but assets grew faster than non-ESG
Net flows into passively managed environmental, social and governance (ESG) ETFs globally slowed in the first half of 2023 but still grew at a faster pace than passive non-ESG ETFs, according to a report by STOXX, a global index provider.
Net inflows to passive ESG ETFs during the six months that ended June 30 totaled €16.1 billion ($17.5 billion), their lowest first-half tally since 2019, the STOXX Quarterly ETF Intelligence Insights newsletter said.
While first-half inflows of passive ESG ETFs were the lowest since the first six months of 2019, when €8.6 billion flowed in, ESG ETFs have seen "tremendous growth" during the past couple of years, Arun Singhal, global head of index product management at Qontigo, said in an interview Aug. 18. STOXX is part of Qontigo, which is owned by Deutsche Boerse.
"And while the first half has demonstrated a slowing of that tremendous growth, there is still significant demand ahead for innovative solutions," Singhal said.
Passive ESG ETFs' assets under management increased 14% during the first half to €392 billion, while passive non-ESG ETFs grew assets by just 9.5% to €7.6 trillion, the report said. ESG ETF growth was driven mainly by investment returns, with ESG ETFs up 9.1% and non-ESG ETFs up 6.9%, the report said.
Slightly more than 4.9% of all passive ETFs' AUM worldwide is now in ESG, up from 4.5% at the end of 2022, the report said. ESG ETFs' share of global passive ETFs' net inflows dropped to 8.1% in the first half of this year. That was down from 10% in all of 2022 and down from 15% in all of 2021, the report found.
However, ESG ETFs' 8.1% share of total global passive ETF inflows is still higher than the 4.9% share they represent of passive ETFs' worldwide AUM, "meaning ESG ETFs continue to gain territory in the world's assets landscape," the report said.