Sustainable Exchange-Traded Funds (ETFs), dominated by funds that pursue an ESG Integration-Mixed approach to sustainable investing, experienced dramatic growth in 2020.  Total net assets expanded from $33.7 billion at the end of 2019 to $93.1 billion at year-end 2020, an increase of $59.4 billion or 176% (refer to Chart 1).  The gains were fueled by positive net cash flows, capital appreciation as well as new sustainable ETF formations that added a net of 37 ETFs during the calendar year, not including a number of ETF re-brandings, to end the year at 154 ETFs and Exchange-Traded Notes (ETNs).  

Chart 1:  Growth of Sustainable ETFs/ETNs:  2015 – 2020

Source:  TNA data-Morningstar.  Sustainable fund classifications-Sustainable Research and Analysis

Slightly over half of these new funds were launched in the fourth quarter of the year, a record that was also distinguished by the introduction of several esoteric social-themed ETFs.  Performance results were very strong across the board in 2020 as ETFs posted an average gain of 28.3%.  Sustainable sector funds, including thematic funds, gained an average 83.8% with alternative energy-oriented funds literally knocking the lights out with returns as high as 233.3%.  The top performing thematic funds accounted for 20% of the 2020 net assets gains.  

The EFT segment is concentrated and dominated by ten firms that account for 92% of assets.  These are led by BlackRock’s passively managed iShares and followed by JPMorgan’s actively managed ETFs.  An analysis of the top 20 sustainable funds that cover $73.9 billion, or 80% of the sustainable segment’s assets under management, indicates that the dominant sustainable investing strategy in the segment is represented by funds that pursue an ESG Integration-Mixed approach.   

Sustainable Research & Analysis LLC provides a timely monthly snapshot of trends and developments affecting the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets, fund flows, fund re-brandings, new fund firms, new fund launches and fund closures.  CLICK HERE to request additional information.

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