ETF Investors Embrace ESG 'Lifestyle'

July 17, 2019

Hot Thematic Funds See Outflows

In fact, most thematic ESG ETFs have not attracted anywhere near the same kinds of flows that these broad-core funds have.

The thematic ETF with the highest flows is the Global X S&P 500 Catholic Values ETF (CATH), which screens large cap U.S. stocks for their compliance to Catholic values. CATH has brought in $86 million year to date.

However, most thematic ESG ETFs have seen flat to negative flows for 2019. In fact, some high profile thematic funds have experienced significant losses, including the SPDR SSGA Gender Diversity Index ETF (SHE), the iShares MSCI ACWI Low Carbon Target ETF (CRBN) and the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST). SHE, CRBN and JUST lost $73 million, $88 million and $96 million, respectively.

 

ESG ETFs With Highest Outflows In 2019
Ticker Fund Expense Ratio AUM ($M) YTD Returns 1-Yr Returns YTD Flows ($M) 1-Yr Flows ($M) MSCI ESG Rating
PBD  Invesco Global Clean Energy ETF 0.75% 50 21.73% 6.69% -4 -7 A
NULG  Nuveen ESG Large-Cap Growth ETF 0.35% 58 24.99% 11.23% -11 3 AA
CXSE  WisdomTree China ex-State-Owned Enterprises Fund 0.32% 141 21.03% -9.91% -14 -40 BB
MAGA  Point Bridge GOP Stock Tracker ETF 0.72% 16 17.93% 0.45% -20 -22 BBB
PRID  InsightShares LGBT Employment Equality ETF 0.65% 3 20.05% 9.48% -23 -23 BBB
HONR  InsightShares Patriotic Employers ETF 0.65% 1 22.02% 9.79% -24 -24 BBB
LOWC  SPDR MSCI ACWI Low Carbon Target ETF 0.20% 74 18.20% 4.95% -71 -80 BBB
SHE  SPDR SSGA Gender Diversity Index ETF 0.20% 293 17.69% 7.91% -73 -42 A
CRBN  iShares MSCI ACWI Low Carbon Target ETF 0.20% 458 18.69% 5.47% -88 -77 BBB
JUST  Goldman Sachs JUST U.S. Large Cap Equity ETF 0.20% 128 18.85% 7.20% -96 -137 A

Source: ETF.com; data as of July 10, 2019

 

Interestingly, although most of the ETFs that have bled investment assets have all been higher cost, SHE, CRBN and JUST all carry expense ratios of just 0.20%.

ESG As Investment ‘Lifestyle’

Flows data suggests that ETF investors are approaching socially responsible investing not as a thematic play but as an investment lifestyle, hoping to convert some or all of their existing asset allocations to more ethically acceptable alternatives without sacrificing market performance.

That's further underscored by the fact that once investors have selected ESG-flavored core products, they tend to stick with them.

Assets in the ESG versions of low-cost core ETFs have proven remarkably sticky. For example, SUSL, USSG, the Vanguard ESG U.S. Stock ETF (ESGV) and the Vanguard ESG International Stock ETF (VSGX) have not experienced a single day of outflows since they launched. ESGE and ESGD haven't seen outflows since mid-2018.

We've often likened socially responsible ETFs to a snowball rolling downhill. If investors continue to park their money into these core ESG products, we may see that snowball become an avalanche sooner rather than later.

Contact Lara Crigger at [email protected]

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