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A transformative shift is taking place in financial markets. Money is flowing into investment strategies that emphasize the most sustainable companies. At the same time, investors are growing wary about allocating capital to companies that fail to demonstrate a commitment to sustainability. Inflows have persisted into sustainable index ETFs in early 2020 in the face of pandemic-related market turmoil, underscoring persistent and growing investor demand for sustainable strategies.

Underpinning demand is a view that corporate environmental, social, and governance (ESG) attributes, such as environmental stewardship and gender pay equity, influence long-term investment risks and opportunities. Investors now parse ESG metrics alongside traditional financial metrics and integrate ESG considerations into their decision-making processes. Importantly, the quality of the data that guides such decisions is getting sharper.

This paper outlines four forces we believe will help grow assets in global exchange traded funds (ETFs) and index mutual funds by roughly $1 trillion by 2030.

Four forces:

  • Recognition that sustainability influences risk and returns
  • Better data leading to better indexes
  • Access to ESG at a fraction of the cost through indexation
  • Sustainable choices for every portfolio