As Sustainable Investing Goes Mainstream, More May Turn to Socially Responsible ETFs

An increasing number of asset managers are adopting sustainable investment strategies, potentially supporting the outlook for socially responsible exchange traded funds that track categories like environmental, social and governance principles.

According to a recent survey, Sustainable Signals: Growth and Opportunity in Asset Management, from the Morgan Stanley Institute for Sustainable Investing and Bloomberg, a majority of U.S. asset managers are now practicing sustainable investing and view it as a strategic business imperative. Specifically, 75% of respondents revealed that their firms have adopted sustainable investing, compared to 65% in 2016.

“The survey results demonstrate that sustainable investment strategies are now a strategic imperative,” Matthew Slovik, Head of Global Sustainable Finance at Morgan Stanley, said in a note. “It is clear that asset managers will continue to invest new resources and expand their product portfolios in the coming years.”

Survey respondents pointed to several key drivers of success in sustainable investing, such as increased investment stability, high client satisfaction, product popularity and possible high financial returns.

ESG Growth Prospects

Nevertheless, there is still a lot of further work that needs to be done before increased adoption. Almost all surveyed asset managers highlighted the need for increased expertise, better data and impact reporting to drive future progress in this category.

“As investors increasingly consider sustainability factors across asset classes and investment products, we expect to see a shift toward better data tracking and reporting mechanisms,” Curtis Ravenel, Global Head of Sustainable Business & Finance at Bloomberg, said in a note. “This will increase credibility and improve measurement of impact across portfolios.”