Exchange-traded funds (ETFs) that invest in securities with sustainability goals are growing in popularity. According to predictions from BlackRock, the world’s largest asset management firm, sustainable ETF fund assets are poised to grow from the current $25 billion to more than $400 billion by 2028. Millennials, in particular, are attracted to these ETFs because they offer low fees and broad diversification while catering to social impact goals.
Sustainable or impact investing are normally the realm of high net worth individuals. But the rise of sustainable ETFs is “a fantastic way to move the whole space of sustainability from the margins to the mainstream,” said Durreen Shahnaz, founder and CEO of the Impact Investment Exchange (IIX) in Singapore, a social stock exchange and impact investing private placement platform. An ETF — a basket of securities that is traded like stocks — is more accessible to small investors because it has a low threshold to entry.
ETFs could be used to pursue ESG (environmental, social and corporate governance) goals like gender equality and bring about greater representation for women in various areas, such as on corporate boards, Shahnaz said. The growing interest in sustainable ETFs has given rise to some other esoteric versions, such as vegan ETFs or those focused on LGBT rights. “People are asking if we could hold publicly listed companies accountable [through] this lens,” she added.