Thematic investing is on the rise, with investors wanting more sustainable thematic funds focused on the United Nations Sustainable Development Goals (SDGs), climate solutions and renewable energy, according to a BNP Paribas survey conducted by Greenwich Associates.
The research found there has been a shift away from allocation based on asset class, geography and business sector towards a more thematic approach, and with that, there is a growing appetite for sustainable thematic funds.
Some 88% of wholesale and 36% of institutional investors already use or plan to use thematic strategies, and 90% believe investing in this way has a positive impact on long-term performance.
More than three-quarters (76%) of investors’ main reason for using thematic funds is for exposure to sustainable and ESG solutions, with the leading preference being an overall focus on the UN SDGs (41%), followed by climate change solutions (21%) and renewable energy (18%).
Pierre Moulin, member of the executive committee and global head of product and strategic marketing at BNP Paribas, said: “The growth of thematic investing has been remarkable, expanding threefold between 2017 and 2020, with notable support from distributors and retail investors. We expect this trend to accelerate, driven by upcoming regulatory change, including the integration of ESG preferences in investor choices under MifFID II, as well as growing demand from institutional investors for thematic strategies.”
BNP Paribas’s findings do appear to correspond with the trends seen in new product launches. Just last week, Credit Suisse and JP Morgan Asset & Wealth Management launched an investment strategy targeting companies that are addressing sustainable nutrition. It will focus on companies that tie together nutrition, health, biodiversity and climate, with a particular focus on nutrition’s societal and environmental aspects.
They also tally with Next Wealth’s findings in April that advisers want clearly branded ESG products to help navigate the world of sustainable investing.
But of course with demand the pressure to launch products comes the danger of greenwashing. “There are three things driving this greenwashing trend,” said Sarah Bratton Hughes, head of sustainability, North America at Schroders at the Global ESG Summit in May. “End-consumer demand, the swathe of net-zero commitments, and policy that is driving capital into greener and cleaner solutions.”