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BlackRock Sees ESG ETF Assets Rising to $400 Billion

This article was originally published on ETFTrends.com.

Investing based on environmental, social and governance (ESG) principles is a theme garnering increased attention, but in the U.S., the 50 or so ESG ETFs have just over $6 billion in combined assets under management.

That is a scant percentage of the overall ETF universe, but BlackRock, the world's largest ETF issuer, sees that trend changing over the next decade.

“BlackRock has predicted that global assets in exchange traded funds that have a sustainable focus will rise to $400bn over the next decade — an increase of some 1,500% from today’s figure,” reports David Ricketts for Financial News.

Popular BlackRock ESG ETFs include the iShares MSCI KLD 400 Social ETF (DSI) and the iShares MSCI USA ESG Select ETF (SUSA). Other well-known funds in this category include the Oppenheimer ESG Revenue ETF (ESGL) and Oppenheimer Global ESG Revenue ETF (ESGF) .

Big Growth for Socially Responsible Investing

While the idea of socially responsible investing (SRI) is taking flight, many advisers and investors are still pondering the ability of these strategies to deliver comparable or better returns relative to traditional equity benchmarks. Still, more companies are noting the importance of ESG themes.

“BlackRock’s forecast for a steep rise in ethical and environmental ETF assets — which it predicted would take such funds from 3% of the total to 21% by 2028 — comes as other fund managers seek to tap into growing demand for such investments,” according to Financial News.

Related: Inside the Fast-Growing Smart Beta ETF Segment

Institutional investors have been a big driver behind the growth in sustainable investing. In addition, individual investors, especially Millennials and women, are becoming more attracted to the availability and potential benefits of the ESG investment styles. The potential shift in investment demand represents an opportunity for financial advisors with an understanding of the space to provide guidance to clients looking to align portfolios more closely with their individual core values.

Several iShares ESG ETFs “track MSCI indices that screen out controversial weapons, nuclear weapons, civilian firearms, tobacco, companies implicated in the violation of the United Nations Global Compact principles, thermal coal and oil sands,” reports Financial News.

For more information on the smart beta strategy, visit our smart beta category.

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