UNCTAD-backed ESG Observatory aims to help investors map passive investments against SDGs.
According to the ESG Observatory platform, launched today, only 207 of 549 (41%) ESG-labelled ETFs are aligned with any one of the UN’s 17 Sustainable Development Goals (SDGs).
Research firm TrackInsight launched the new platform in collaboration with Conser, an independent ESG-focused advisory firm, and the backing of the United Nations Conference on Trade and Development (UNCTAD).
It is designed to help investors to monitor ESG investment trends, compare the ESG offerings of ETF issuers and measure their contribution to SDGs.
Sponsored by Amundi Asset Management, the ESG Observatory digital tool scans fact sheets and any other information made publicly available by providers to identify ESG ETFs that outline a specific intention to align with an SDG. Investors are then able to access more in-depth information around these individual funds through the site, including their specific holdings and ESG ratings from TrackInsight.
Any ESG ETFs not identified as SDG-aligned by the ESG Observatory have supplied information that is too vague to categorise, the TrackInsight team has explained.
Currently, ESG Observatory is not able to allocate more than one SDG-alignment per ESG ETF. For example, an ESG ETF may be considered to be aligned with both ‘clean energy’ and ‘clean water’, but can only be listed as aligned with ‘clean energy’. One spokesperson has said that the platform aims to reflect ESG ETFs alignment with multiple SDGs in the near future.
ESG ETFs are proving to be an increasingly popular sustainable investment vehicle, with assets more than trebling with a 223% increase in 2020 to US$189 billion with nearly 200 new listings, according to TrackInsight data.
Furthermore, ESG ETFs haven’t suffered outflows in any single month since the start of 2019, according to Lyxor’s ‘2020 Money Monitor’ report, suggesting the sustainable segment of the passive investment market is resilient in the face of market volatility, such as has been seen in the wake of Covid-19.
However, with the ESG Observatory platform highlighting that over half of ESG-labelled ETFs show no alignment to SDGs, 2021 may see investors re–examine their portfolios.
“More than ever before, asset owners need to integrate environmental, social and corporate governance factors, including those related to the SDGs, into their investments,” Yongfu Ouyang, Chief of Institutional Investment Facilitation at UNCTAD, told ESG Investor.
ESG ETFs that are aligned with an SDG are largely focused on ‘climate’ or ‘diversity and inclusion’, leaving goals such as ‘good health and wellbeing’ and ‘no poverty’ under-represented.
“Aligning with the SDGs will bring more credibility to their claims of being sustainable investors, while helping them to mitigate a range of material risks to their investments. The SDGs are becoming a new benchmark for sustainability performance, as well as helping asset owners to structure their stewardship activities and measure impact,” Ouyang continued.
ESG Observatory analysts expect their monitoring activities will put pressure on ESG ETF providers to be clearer within their propositions and public statements about their products’ alignment and areas of focus.
“With the market for ESG ETFs exploding worldwide, ESG Observatory provides a valuable resource for investors who want independent data and information on the market, knowledge of the investment choices they have and metrics to gauge which of the ETFs are contributing most to a sustainable future,” said Jean-Rene Giraud, Founding CEO of TrackInsight.