ESG Hits Record $799B in ETF Assets Globally

ESG may be the most controversial acronym in finance, but don’t tell that to ETF investors.

Environmental, social and governance exchange-traded funds reached a new milestone, with global assets climbing to $799 billion through the end of November, according to ETFGI data. The category pulled in $5.7 billion in November alone, bringing year-to-date inflows to almost $49 billion, a 25% increase over the prior year. But it also comes at a pivotal time, as asset managers continue to downplay ESG labels and critics on Capitol Hill have accused fund managers of everything from political bias to regulatory overreach. 

The resurgence of ESG funds could also become a savvy play for financial advisors looking to attract younger, more sustainability-minded clients. “Political winds are fickle, but long-term investors recognize reality,” said Max Kulyk, founder of the fee-only planning firm Chicory Wealth. “Criticism from lawmakers has only turned up the volume.”

ESG’s MVPs

Last year’s sales tally ranked sixth-highest on record, though it trailed years during ESG’s heyday: Inflows peaked at $147 billion in 2021. Broad strategies attracted the bulk of assets, but investors also directed money toward clean energy, green bonds and transition-focused funds. “What we are actually seeing is the ‘weeding out’ of products that were never truly impact investments to begin with,” Kulyk said. “Products [got] slapped with an ‘ESG’ label during the boom a few years back, opaquely structured as ETFs or mutual funds, with no transparency into the environmental or societal impact of the companies within them.”

The data also show:

• BlackRock remains the undisputed heavyweight, managing $269 billion and controlling 33.7% of the global market. 
• Amundi ETF follows with just shy of $109 billion, while UBS ETFs manages $55 billion. 
• The top three hold more than half the world’s ESG assets inside the wrapper.

“Under the current political climate, ESG as a label has come under attack,” said Kristin Hull, founder of Nia Impact Capital. “Yet, business concerns about the material aspects of the environment, human capital and governance are more pertinent than ever.”

It’s Not Easy Being Green. One of the longstanding issues has been finding a standardized criteria for ESG products. That still seems to be the case with 56% of adopters saying there is a lack of clarity around what the strategy actually means, according to a survey cited in the data. Younger generations, like millennials and Gen Z, are especially motivated by sustainability and are choosing financial advisors based on it, Hull said. “As the Great Wealth Transfer takes place, women and younger investors see climate as a key risk factor and want their money aligned with the economy they want to see.”