Money does matter, at least when it comes to investing in funds that meet ESG criteria. In other words, the larger a portfolio, the greater the proportion of products classified as ‘green’ there will be in it. This is one of the main conclusions drawn from a study carried out by Invesco on investor opinion on ESG-linked ETFs. The manager has detected that those people who have invested 100,000 euros or more use around 40% of the amount in this type of vehicle, compared to those who allocate 5,000 euros or less, with a weight of around 30%.
“As the portfolio grows, so does the perceived ability to invest sustainably,” the firm points out. In this sense, Spain fares poorly in European comparison. Specifically, only 33% of the total amount that Spaniards invest has sustainable overtones, appearing as one of the countries “least convinced in this regard.” It is even behind Switzerland (36%), France (37%) and Germany, which is also below the average (39%), while the other side of the coin is represented by the United Kingdom (40%). , Sweden (41%) and the Netherlands, where almost half of the portfolios are allocated to sustainable investments.
The positive part is that in all the markets analyzed the ESG allocation is significantly higher than a third. Factors attributing this include the fact that it may be a lower priority, a lack of capacity to adopt a sustainable approach, as well as experience. In this regard, Invesco observes that new investors are more likely to invest in ESG, compared to those who have been exposed to other types of products for more years. “Experienced investors launched their investment strategy before the recent and rapid rise of ESG,” highlighted Laure Peyranne, head of Invesco ETFs for Iberia, Latin America and US Offshore.
The good news is that Spain does not fare so badly when equating the adoption of ESG criteria with the total mass of investors. In this case, at the national level the share of retailers amounts to 52%, only behind France and Germany, with 57% and 55%, respectively. In the rest, the percentage ranges from 50% in the Netherlands to 43% in Sweden. “The result in Sweden is surprising, as Scandinavian countries are typically considered to be very conscious of sustainability. This comparatively lower score could be due to ESG issues being present in the portfolios of a larger number of investors and not It is considered an independent investment element,” he emphasizes.
From a sample of more than 5,000 people, the Invesco study shows that ESG still has growth potential ahead, with the largest portfolios, again, showing a greater preference for increasing ESG exposure compared to smaller ones. . This is true in 68% of portfolios of more than 100,000 euros compared to 56% of those less than 5,000 euros, in a sign that the rise of ESG investment is not slowing down in Europe despite the increase in voices questioning These criteria in some regions of the world. “In the United States, interest is less because oil companies are excluded. We think that part of the solution is not to exclude, but to give a more sustainable approach,” adds Peyranne.
However, in European comparison there is a greater preference for environmental criteria, that is, those governed by the letter ‘E’, which in the Spanish case reaches 44%, to the detriment of social and corporate governance factors. . , with a percentage is 22% and 19%, respectively. Among environmentally themed products, the most attractive in the Old Continent are those that support the development of renewable energies, those that contribute to the conservation of natural resources and biodiversity, as well as those that help reduce pollution and waste. .
In the background are issues such as strategies that defend human rights, products that mitigate poverty and inequality from a social point of view, while in terms of corporate governance, funds that put pressure on companies to guarantee that management compensation and incentives are adequate. This situation is influenced by the lack of supply, as most of it is concentrated on the environment.
Invesco sees potential for passive investing
In this context, Laure Peyranne has influenced the rise of ETFs over the last three years, especially in Europe, an area where there have been inflows of money into this type of products worth 440 billion. Of this amount, 210 billion in exchange-traded funds have been allocated to ETFs associated with sustainability. With all this, its weight is reduced in the whole with a representation of listed funds of 10% of total assets. Of this figure, only 12% apply ESG criteria, with the energy transition being the segment that arouses the greatest interest given the enormous financing needs that want to promote solutions that address this challenge.
Looking ahead to the coming years, among the main challenges it has to deal with are “more favorable” regulation, as well as the lack of information and education. The ‘greenwashing’ scandals have harmed the industry, causing greater distrust towards ESG investing, which according to Laure Peyranne leads investors to doubt the real impact of sustainable investments, forcing the sector to be stricter. “Investing in hydrogen is not the same as a complete index; what gives credibility is seeing the names of large companies, like Iberdrola.”
