Environmental, social and governance investing is making a big splash in the world of indexing. BlackRock’s iShares has predicted investment in the space will grow to $1 trillion by 2030. It’s already on track for a record year in 2021, with over $21 billion in inflows just in the first quarter. The world’s largest index provider also has big plans.
“We’re ... treating ESG as one of our biggest growth opportunities,” S&P Dow Jones Indices CEO Dan Draper told CNBC’s “ETF Edge” on Monday.
“We’re seeing a lot of demand in Europe around climate specifically and now it’s starting to translate to the U.S. as well,” he said.
S&P Dow Jones currently offers 39 ESG-related indexes spanning core ESG, climate-specific and thematic ESG considerations. It also has its own scoring system, bolstered by its 2016 acquisition of data company Trucost.
The Securities and Exchange Commission is looking into how index providers define ESG, but with many already using or developing scoring systems of their own, it may prove difficult to regulate, ETF Trends and ETF Database CEO Tom Lydon said in the same interview.
“Right now, we’re so far along with so many different benchmarks and strategies, it’s really going to be difficult for the SEC to set standardization and regulation over definition of ESG,” he said.
Lydon and Draper are also squarely focused on cryptocurrencies.
Lydon recently sold ETF Trends and ETF Database to index provider Alerian and partnered with Galaxy Digital’s Michael Novogratz, a well-known crypto investor, to develop indexes in the red-hot digital asset space.
“Last year, there were a lot of advisors that were looking at commodities, that were concerned about higher interest rates, that were concerned about inflation. They were also looking at infrastructure. And all these areas were a bit ahead of their time,” Lydon said.
“We can share that information with issuers out there to help them maybe do a better job in some of their current indexes, but also help them fill holes or gaps in their lineup specific to what advisors and investors are looking for.”
So far, Alerian and ETF Trends have launched eight indexes packaging together blockchain companies, crypto owners, companies that enable crypto transactions, miners, futures and more.
S&P Dow Jones was ahead of the curve, launching its own bitcoin, ethereum and broad-based crypto indexes at the end of last year.
“Those indices are in market. They’re building track records and ... we’re excited to have the indices available for various types of investable products – derivatives, ETFs, what have you,” CEO Draper said.