Investor demand is behind Invesco‘s new sustainably focused additions to its innovation suite, its head of ETFs says.
With the firm’s popular QQQ ETF crossing $200 billion in assets in the last month, its newest products aim to seize on two hot themes: tech and environmental, social and governance investing.
Launched in late October, the Invesco ESG Nasdaq 100 ETF (QQMG) and Invesco ESG Nasdaq Next Gen 100 ETF (QQJG) will serve as sustainable counterparts to Invesco’s Nasdaq 100 ETF (QQQM) and its Nasdaq Next Gen 100 ETF (QQQJ). QQQM and QQQJ have raised a combined $4 billion in the last 12 months.
“To maintain optionality, we brought in the ESG versions of those indexes where performance is incredibly aligned with the mother index, so to speak … but companies are rewarded for exhibiting good ESG behavior,” Invesco’s head of ETFs and indexed strategies, Anna Paglia, told CNBC’s “ETF Edge” on Monday.
The key to future growth will be true and accurate marketing, Paglia said. She added that U.S. ESG products could see the same explosive growth as in Europe, where sustainable ETFs and mutual funds now account for 81% of new flows.
“This is a market that is going to continue to grow because it is attractive to the institutional audience and the retail audience today,” she said.
Given the interest, 2021 could prove to be the strongest year for ESG in a long time, Dave Nadig, chief investment officer and director of research at ETF Trends, said in the same interview.
“By the time we get to the end of the year, I imagine … something like 4 or 5% of the flows will have been into ESG-related products,” Nadig said. “At the same time, we have just a flood of new products.”
ESG ETF and exchange-traded product launches around the world raked in a record $119 billion in net inflows in the first nine months of this year, according to research firm ETFGI.
Though Nadig expects “light-touch regulation” determining what does and does not constitute ESG down the line, for now, the interest is undeniable.
“A lot of these products are coming to market at the request of institutions that are making large allocations,” Nadig said. “Many of these launches here have come out of the gate with big assets from institutions. So whether you as a retail investor are interested in these products is up to you. The institutional market? They’re voting with their wallet.”
Disclosure: Invesco is the sponsor of CNBC’s “ETF Edge.”