Key Points:
- Sustainable investing is gaining popularity among global investors.
- The number of indices measuring environmental, social, and governance (ESG) criteria has seen a significant increase.
- Asset managers prioritize ESG and are looking for more ESG indices in various asset classes.
- Investors trust ESG indices to direct their investments and improve comparability in ESG performance.
- There is also growth in the number of indices measuring fixed-income markets and thematic indices.
- Asset managers are expected to bring more ESG and fixed-income investment products to the market in the coming years.
Sustainable investing has become a major focus for investors worldwide, according to the fifth annual survey conducted by the Index Industry Association (IIA). The survey measures the number of indices across different asset classes and geographies, providing insights into emerging areas of investor interest.
In recent years, there has been a significant increase in the number of indices measuring environmental, social, and governance (ESG) criteria. This year’s survey results show a record year-over-year increase of 43% in the number of ESG indices. This growth reflects the growing demand for reliable ESG market measures as investors embrace sustainable investing strategies.
Asset managers prioritize ESG and consider it a high priority for their companies. The proportion of ESG assets in global portfolios managed by asset managers is expected to rise from 26.7% to 43.6% in the next five years. However, the lack of quantitative data remains a challenge for ESG implementation, with 63% of surveyed asset managers citing it as an obstacle.
Investor trust in ESG indices is another factor driving their rapid expansion. According to the IIA’s ESG survey, 80% of respondents believe that indices help them direct their investments to companies and sectors with strong ESG performance. Additionally, indices improve comparability in ESG performance for 73% of respondents, and 78% believe that indices increase their confidence in ESG data’s reliability.
In addition to ESG indices, there has been growth in the number of indices measuring fixed-income markets and thematic indices. The survey found a 61% increase in the number of ESG indices in the fixed-income space. Thematic indices, which focus on specific investment themes, also saw a 27.5% increase year-over-year.
Looking ahead, the survey results suggest that asset managers will bring more ESG and fixed-income investment products to the market. As more quantitative corporate disclosure data becomes available, better ESG benchmarks will be created, enabling asset managers to develop investment products that align with investors’ sustainable finance objectives.
