INTRODUCTION
Europe out in front
When examining the ESG space , the contrast between Europe and the US could not be starker . One only has to take a glance at the ETF product development both sides of the pond to gain an understanding as to how different the mindset is .
Highlighting this , while issuers have launched a string of climate ETFs linked to Paris-aligned benchmarks in Europe over the past few years , an anti-ESG ETF in the US recently captured over $ 300m assets in less than a month after launch .
However , this is just the tip of the iceberg in the US . A huge swathe of anti-ESG sentiment has swept across the political landscape with Republican states such as Texas implementing Boycott Acts against firms that exclude certain activities from their investment products on ESG grounds .
The sentiment does not look likely to be going away any time soon and has left industry commentators in Europe gobsmacked about how vitriolic the response has been to attempts to shift the country towards net-zero .
In Europe , the situation could not be more different with investors across the spectrum looking to shift assets to ESG , driven by regulatory tailwinds such as the Sustainable Finance Disclosures Regulation ( SFDR ) and more awareness through initiatives such as COP26 about the need to transition to net-zero .
Regulatory developments including a breakdown of the incoming ‘ level 2 ’ of SFDR are assessed in Section 4 of this report . Asset managers have a race against time to ensure they are ready for this next phase , however , the different classifications – Article 6 , 8 and 9 – have caused much confusion and could lead to numerous downgrades .
Elsewhere , keep an eye out for ETF Stream ’ s State of the Market article on the current ESG ETF landscape in Section 3 as well as five key myths told about ESG ETFs in Section 1 .
Overall , we hope this report provides investors with a temperature check on the current ESG ETF landscape in Europe . From SFDR to the role of ETFs in the transition to net-zero , it is crucial investors stay on top of the biggest trend in asset management .
Tom Eckett Editor ETF Stream
ESG Unlocked : Europe out in Front October 2022 3