Trackinsight: ESG ETFs, how are they faring in 2022?

ESG ETFs total AUM drops on geopolitical turmoil and central banks hawkish stance.

ESG ETFs, like their non-ESG peers, are not immune to the downturn in global markets. After ending last year with combined assets under management (AUM) of $422 billion, the total ESG ETFs AUM dropped by -10% to settle at $381 billion in the first week of March 2022. The geopolitical turmoil caused by the Russia-Ukraine war — coupled with the changing macroeconomic landscape — have weighed down on the performance of ESG assets.

However, ESG conviction remains strong with investors adding over $17 billion into ESG ETFs in the first two months of the year.

Most and least popular ESG ETFs in America year-to-date

In America, ESG investors added net inflows of $3.25 billion into ESG ETFs. Among the biggest receiving funds are iShares ESG Aware MSCI EM ETF (ESGE, +$678 million), BMO MSCI USA ESG Leaders Index ETF - CAD (ESGY, +$597 million), and Vanguard ESG U.S. Stock ETF (ESGB, +$430 million). On the other hand, Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG, -$631 million), BMO MSCI USA ESG Leaders Index ETF - CAD Hedged (ESGY.F, -$603 million), and Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL , -$375 million) were among the biggest flow dispensers.

Most and least popular ESG ETFs in Europe year-to-date

Europe, the godfather of ESG investing, have welcomed roughly $12.5 billion into its ESG ETFs this year. The most popular ESG ETFs for 2022 have been SPDR Bloomberg SASB U.S. Corporate ESG UCITS ETF (SPPU, +$1,373 million), Xtrackers MSCI USA ESG UCITS ETF (XZMU, +$826 million), and BNP Paribas Easy MSCI USA SRI S-Series PAB 5% Capped UCITS ETF(EKUS, +$784 million). Meanwhile, investors have pulled out funds from iShares MSCI EMU ESG Screened UCITS ETF (SAUM, -$885 million), Amundi MSCI USA ESG Leaders Select - UCITS ETF (SADU, -$776 million), and Xtrackers MSCI Japan ESG UCITS ETF (XZMJ, -508 million).

ESG Investing Outlook 2022

The ESG Investing Outlook for 2022 remains strong according to asset managers. "ESG adoption is now advanced in the institutional market, especially Europe. However, we believe that we are far from reaching a tipping point on ESG adoption, with growing interest from institutional investors in the US and Asia," said Matthieu Guignard, Global Head of Product Development and Capital Markets at Amundi. He added that retail investors have only recently begun to incorporate ESG strategies in their portfolios, leaving plenty of room for further penetration.

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