Leveraging the Potential of ESG ETFs for Sustainable Development

Author: SDG Investors

Year Published: 2020

To achieve the United Nations Sustainable Development Goals (SDGs) and finance the investment needed in infrastructure, agriculture, energy, and public services, in developing countries alone, will require at least an extra $2.5 trillion1 a year, between 2015 and 2030. Mobilizing and channelling finance to these sectors in developing country markets will play an important role in bridging the investment gap. Investment vehicles with an ESG or SDG dimension that mobilize capital at large scale can make a difference. One such vehicle that offers this potential is ESG ETFs — exchange traded funds (ETFs) based on corporate environmental, social and governance (ESG) factors.

This report provides an overview of the ESG ETF landscape, in the context of sustainable finance, and identifies key trends in the growth and distribution of ESG ETF funds. It assesses their financial and sustainability performance, examines the main drivers behind the rapid rise of ESG ETFs in recent years, and evaluates the challenges. The report also discusses possible actions that can be taken by key stakeholders to grow ESG ETFs into a mass market financial vehicle for sustainable development.