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Many U.S. investors bought shares of ESG ETFs during the recent market swoon

Worries about the economic ramifications of a global pandemic injected volatility into global markets in late February, all major U.S. stock benchmarks fell into bear markets on March 12 and the full monthly decline for the S&P 500 was the worst since the great financial crisis.

Given the magnitude of the recent sell-off, it is notable that many investors were buying shares of environmental, social and governance (ESG) ETFs. iShares ESG U.S. Equity ETFs saw +$390mm in net new assets while the U.S. ETF industry saw net outflows of -$13.0bn between February 21 and March 13.

That investors in aggregate added money to ESG ETFs through the market turmoil suggests conviction in their strategies and perhaps that some investors saw opportunities to initiate or add to positions.

Additionally, the recent flows underscore changing investor preferences and growing conviction in companies that may be better positioned to manage sustainability-related risks such as climate change.

Total net flows for U.S.-domiciled ETFs ($bn)

Total net flows for U.S.-domiciled ETFs ($bn)

% of ETFs observing net outflows

% of ETFs observing net outflows

Total net flows for U.S.-domiciled ETFs ($bn)

Total net flows for U.S.-domiciled ETFs ($bn)

% of ETFs observing net outflows

% of ETFs observing net outflows

Source: BlackRock, for the period 02/24/2020 to 03/13/2020.

iShares ESG U.S. equity ETFs performance during volatile markets

iShares ESG ETFs provide a broad range of solutions to help investors pursue their financial and sustainability objectives. Some strategies are designed to improve ESG scores while mirroring traditional benchmarks, and others are designed to potentially deviate more from traditional benchmarks.

During multiple periods of market turbulence, our broad-based iShares ESG U.S. Equity ETFs have exhibited performance that has been in line with or slightly above their respective broad market indexes. This is consistent with the performance observed during the initial two weeks of the coronavirus-driven market drawdown.

Performance of iShares ESG U.S. Equity ETFs during different market selloffs – NAV Total Return (%)

ETF Large/Mid capParent IndexETF
All cap
Parent Index
ESGUSUSLSUSAMSCI USADSIMSCI USA IMI
Coronavirus (2020) – Cum. Ret. % -18.75% -18.86% -17.61% -19.06% -18.84% -19.96%
Fed Policy Reaction (2018) – Cum. Ret. % -19.58% - -19.26% -19.53% -18.33% -20.18%
Energy and EM Downturn (2015-2016) – Cum. Ret. % - - -12.33% -13.47% -12.49% -14.52%
US Credit Downgrade (2011) – Cum. Ret. % - - -17.24% -17.70% -16.62% -18.95%
Global Financial Crisis (2007-2009) – Cum. Ret. % - - -53.89% -54.86% -53.89% -55.21%

Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Performance data represents past performance and does not guarantee future results. Investment return and principal value will fluctuate with market conditions and may be lower or higher when you sell your shares. Current performance may differ from the performance shown. For most recent month-end performance see www.iShares.com. For standardized performance and to see how the funds performed against these indexes during other time periods, please see the end of this page. The index shown is the parent index of the index that the fund seeks to track. There may be material differences between the fund's index and the index shown including without limitation holdings, methodology and performance. Financial Crisis measured 10/10/07 – 03/09/09, US Credit Rating Downgrade measured 07/25/11 – 10/03/11, Energy and EM Downturn measured 07/21/15 – 02/11/16, Fed Policy Reaction measured 09/20/18 – 12/24/18. Coronavirus measured 02/21/20 – 03/13/20.

ESG through a sector lens

Because several ESG strategies in the industry underweight the energy sector, some investors may assume that declining oil prices played an outsized role in the relative outperformance of ESG strategies. While all of the broad-based iShares ESG U.S. Equity ETFs had a slight underweight to energy compared to the broad market, this did not contribute significantly to relative outperformance in any of the four ETFs.

Attribution analysis revealed that, on a sector basis, an underweight to the financial sector was a significant contributor to relative outperformance of all four iShares ESG ETFs. This proved favorable as the financial sector was hit by a swift decline in interest rates.

ESG through a factor lens

Recent equity market declines highlight an overlap between companies with strong balance sheets and stable businesses and those with positive ESG practices. Analysis suggests that a perhaps overlooked aspect of sustainable investing may be an above market exposure to quality and minimum volatility factors.

iShares ESG U.S. Equity ETFs showed active exposure to Quality & Minimum Volatility vs. broad market indices¹

iShares ESG U.S. Equity ETFs showed active exposure to Quality & Minimum Volatility vs. broad market indices*


Both Quality and Minimum Volatility have tended to perform well in economic slow down scenarios

Both Quality and Minimum Volatility have tended to perform well in economic slow down scenarios

A three-year analysis of four iShares ESG U.S. equity ETFs shows that they exhibit above-market exposure to both the quality and minimum volatility factors and less—than-market exposure to the value factor.2

Given these persistent factor exposures, the iShares ESG U.S. equity ETFs performed in-line with expectations during the coronavirus-related sell-off. Exposure to the quality and minimum volatility factors may have helped cushion against declines; similarly, lower exposure to value may have been beneficial given the value factor’s challenges in periods of slowing economic growth.

Our large/mid cap funds (ESGU, SUSL, SUSA) demonstrated persistent tilts toward size of varying degrees over the past three years. On the other hand, our all-cap fund (DSI) demonstrated a persistent tilt away from the size factor which tends to outperform in periods of economic recovery.

iShares ESG U.S. equity ETFs do not seek to capture factors; however, the fund’s holdings have tended to exhibit characteristics that can be quantified using the factor lens.

Getting back into the market with ESG ETFs

Many investors are looking to recalibrate the risk of their portfolios amid the current turbulence. Now may be an opportune time to consider legging into long-term equity positions using iShares ESG ETFs.

For more information about these and other iShares Sustainable ETF solutions, please visit https://www.ishares.com/sustainable and the individual product pages below.

Standardized performance (03/31/2020)

Standardized Performance

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com. For fund fees and expenses, click on the fund names below. Performance figures are annualized for periods longer than one year. Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. eastern time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times.

Tanvi Pradhan, Claudia Silva, and Elizabeth Turner contributed to this article.

Sarah Kjellberg
Head of U.S. iShares Sustainable ETFs
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