3 Minutes to Read (Reuters) – LONDON (Reuters) – The rush to invest in exchange-traded funds that focus on environmental, social, and governance (ESG) issues increased dramatically in the first half of 2021, according to Deutsche Boerse, with monthly turnover more than tripling to roughly 3 billion euros from a year ago. PHOTO FROM THE FILE: During the afternoon trading session in Frankfurt, Germany, on February 23, 2016, the trading room of Frankfurt’s stock exchange (Boerse Frankfurt) is reflected in the window of the visitor’s gallery. Kai Pfaffenbach/Kai Pfaffenbach/Kai Pfaffenbach/Kai Pfa Investors are increasingly interested in ESG assets, as companies that do well on issues ranging from climate change to boardroom diversity are considered as stronger long-term investments than counterparts that fall short. German stock market operator Deutsche Boerse said ESG ETFs now account for more than 16 percent of total ETF trading turnover on its Frankfurt-based electronic trading platform Xetra, up from 6% a year ago. At the end of June, assets under management for ESG ETFs listed on Xetra were 137 billion euros ($161.62 billion), up from 43 billion euros a year earlier. “Europe is at the forefront of ESG investing, as seen by the growth of our ESG ETF strategy,” said Stephan Kraus, head of Deutsche Boerse’s ETF division. ESG ETFs have profited from their huge holdings in in-demand mega-cap technology corporations, which have been bolstered in part by a slew of European Union legislation aimed at assisting the bloc’s transition to a low-carbon economy. While actively managed ESG funds account for the majority of the industry, passive funds are gaining ground as the broader structural trend of accessing markets through less expensive index-tracking products gains traction. Morningstar data shows that flows into European ESG ETFs totaled 27 billion euros in the first quarter of 2021, more than four times the same period last year. Globally, flows into European-focused ETFs are the most significant, dwarfing net flows into the United States and other markets. Though most of the funds are controlled by active strategies, total assets under management by ESG funds increased to about $1.7 trillion at the end of the March quarter, more than double from two years ago. According to Refinitiv statistics, while a worldwide index of ESG shares has moved in lockstep with its broader global shares equivalent so far this year, several ESG ETFs have delivered exceptional results. Last year, Deutsche Boerse received a substantial boost to its ESG business franchise when it purchased ESG analytics firm Institutional Shareholder Services (ISS) in March 2020. (1 dollar = 0.8477 euros) Saikat Chatterjee contributed reporting; Simon Jessop contributed additional reporting; and Hugh Lawson edited the piece./n
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