The confluence of two forces in the investment world is sustaining the adoption of ESG investing in exchange-traded funds (ETFs). Indeed, the number of ESG ETFs jumped by nearly 600% in a decade to 2019, with 75% of the ESG funds launched just in past four years. As a result, the number of ESG ETFs is outstripping the launch of non-ESG ETFs globally. Taiwan is among the economies in the Asia-Pacific that has a strong focus on ESG. In the past 12 months, Taiwan’s market launched the first ESG ETF and also the region’s first ESG futures contract.
While the future for ESG investing in ETF wrapper looks unstoppable, the sector needs to overcome a number of challenges. The interest in ESG investing is far outstripping the setting of common standards and data availability. For sustainability to be truly embedded in ESG ETFs, adherence to the United Nations Sustainability Goals is imperative. Industry players need to come together to ensure that ETFs launched with an ESG slant do meet minimum standards of compliance. ESG ETFs should broaden to track beyond the established companies and markets but also into the emerging markets.
With large inflows into the ETF market, Taiwan has a golden opportunity to lead the Asia-Pacific ETF market to embrace ESG further. In long term, funds which incorporate ESG factors into their portfolio are expected to achieve a better performance. There is still a long way to go for each market participant to start implementing the ESG mindset into their actual investment decisions.
The Asset Events plus is pleased to be hosting this exclusive webinar to discuss Sustaining ESG investing in ETFs.