ETF Investors Backing Thematic and Impact Products, Survey Shows

The majority of global exchange-trade fund (ETF) investors plan to increase exposure to thematic products, according to new research.

A survey of ETF investors by Brown Brothers Harriman & Co (BBH) found that 85% of respondents wanted to allocate more to thematic funds such as those focused on climate change or renewable energy.

The report sampled nearly 400 institutional investors, fund managers and financial advisors from the US, Europe and Greater China. BBH reported that more than a third of respondents planned to allocate 11-20% of their portfolio to thematic ETFs over the next five years.

Shawn McNinch, global head of ETF services at BBH, said: “With allocations rising across active, thematic and ESG strategies globally, it’s evident that the depth of choice in the market continues to provide new portfolio opportunities for investors of all types.”

Nine in 10 (89%) of investors said they planned to add environmental, social and governance (ESG) themed funds to their portfolios. This was despite many citing a “lack of consistent methodology” as a barrier to the progression of ESG adoption.

Just over half (56%) of these respondents said they would access ESG exposure through thematic ETFs.

“While the mutual fund market asset base is still considerably larger than ETFs, the difference narrows each year and likely will continue to do so, especially as ETF flows remain strong, mutual fund to ETF conversions gain momentum and global retail markets grow,” added McNinch.

BBH’s survey also found that 54% of global investors planned to add exposure to digital assets and cryptocurrency through thematic strategies in 2022, reflecting the growing interest in the crypto-assets sector.

A recent report by Bloomberg Intelligence showed that interest in ESG ETFs was continuing, with investments in this area expanding for over 38 straight months.