European investors more likely to embrace sustainable ETFs than US counterparts
European investors are displaying a greater inclination towards investing in sustainable exchange-traded funds (ETFs) compared to their US counterparts, driven by a heightened awareness of sustainability issues, according to a survey conducted by Track Insight in partnership with JP Morgan and State Street. The survey, which involved 500 global investors, unveiled that 35% of European investors plan to increase their exposure to environmental, social, and governance (ESG)-aligned ETFs, whereas only 25% of US investors expressed the same intention.
The study further revealed that European investors exhibit a stronger interest in environmental change strategies, with 50% already having investments in this sector and an additional 40% expressing a desire to start investing in it. The greater interest from European capital is reflected in the availability of environmental change strategies in the region, with Europe offering 40% more thematic ETFs aligned with this strategy compared to the US.
This contrast in ESG conviction between the US and Europe underscores the heightened awareness of the topic within the European Union (EU). The report highlights that inconsistencies in ESG analysis continue to pose the most significant hurdle to ETF investment for global investors. Transparency and consistency of data have remained the biggest challenge for ESG ETF investment for the fourth consecutive year in 2023, cited by 62% of investors. However, there has been a decline in the percentage of investors identifying this as a challenge since 2021, indicating improvements in this area.
The report also acknowledges that the introduction of the EU Sustainable Finance Disclosure Regulation (SFDR) in March 2021 has led to improvements in the consistency of ESG data. The SFDR mandates product providers to assess and disclose the ESG characteristics of their offerings. Despite the availability of more metrics for measuring the ESG impact of Europe-domiciled ETFs, transparency remains a greater concern for European investors than their US counterparts. This discrepancy is attributed to increased regulations and potentially higher client expectations in Europe, as noted by Track Insight.
Overall, the survey underscores the growing preference for sustainable ETFs among European investors and the evolving landscape of ESG investment, while highlighting the continued importance of data transparency and consistency as areas of focus for market participants.