According to Morningstar, Vanguard Group was the only major ETF provider to post an increase in European assets last year. As a result of its lower exposure to environmental, social, and governance strategies. Vanguard quit the world’s largest climate-finance alliance in December.
Associate director of passive strategies at Morningstar Inc, Jose Garcia-Zarate said in an interview that the world’s largest asset manager is “an outlier in the European context.”
According to an analysis by the market researcher, Vanguard was the only ETF provider to see its European business grow in absolute terms last year. This was because of “its minimal exposure to ESG in a year when ESG underperformed mainstream investments.”
As per Zarate, Vanguard benefited more from being exposed to fossil fuels than the industry’s other firms. Estimates by Morningstar show that the ETF provider incorporates ESG into about 1% of its European ETFs, compared with approximately 17% of BlackRock’s iShares products.
Morningstar estimates that Vanguard’s European assets under management went up from €79.1 billion to €79.6 billion. In contrast, assets managed by BlackRock’s iShares products went down to €585.8 billion from €616.9 billion.
Morningstar said,
“Against very challenging financial market conditions, the European ETF market proved remarkably resilient in 2022.”
Garcia Zarate also said that because Vanguard’s ESG business is relatively limited, it helped in cushioning capital losses.
Garcia-Zarate said that investors mostly favor ESG as a long-term trend. He added that in 2022 when ESG did worse than mainstream assets, that helped Vanguard.
Last month, Vanguard was in the headlines post its announcement of walking out of the Net Zero Asset Managers initiative. The same is a sub-unit of the Glasgow Financial Alliance for Net Zero. The decision signified opposition from the climate-finance alliance, convened by Mark Carney, the former Bank of England Governor, in 2021.