Global ESG ETF assets 2006-2023
The value of assets allocated to ETF funds, which included environmental, social, and governance (ESG) goals in their strategy, increased markedly from five billion U.S. dollars in 2006 to 391 billion U.S. dollars in 2021. As of November 2023, allocated assets reached 480 billion U.S. dollars. Investment in sustainable funds, including ETFs, was primarily driven by developed markets mainly in Europe and the United States.
What is environmental, social, and governance (ESG) investing?
The ESG criteria is a set of principles used by investors to evaluate a company's performance when considering potential investments. The environmental aspect looked at the business's engagement in safeguarding the environment. From a social perspective, investors evaluated the business's impact on the local community and its relationships with stakeholders. Governance was reviewed by looking at internal controls, stakeholder rights, and executive pay. ESG factors have been an important component of investment decision-making. From a survey of 356 participants the majority of investors expected ESG to be a part of a firm's core strategy.
The impact of ESG
As ESG relevance has increased over recent years, many firms aimed to achieve higher ESG scores, yet the difference between the ESG scores of the largest 25 companies by market cap remains vast. Companies such as Visa and Mastercard had a ranking of 60 points or above. Commitment to ESG by high level executives had become a priority worldwide as approximately half of the senior management in France, Japan, Singapore, and Germany noted a commitment to ESG. ESG's importance had also grown among investors as approximately one-third of investors noted a willingness to divest from a firm if they felt the company had taken insufficient action to focus on ESG-related goals.
