Rapid Growth in EFTs with ESGs

FEATURE

Rapid Growth in EFTs with ESGs

New Invesco study reveals that ETFs including ESG considerations see strong growth in terms of net new assets as investors believe ESG can enhance long term performance

More than half of institutional investors (55%) believe the majority of their ESG (environmental, social and corporate governance) investments will be held in funds (ETFs) by 2025, according to new research study from Invesco. in their portfolios said that, on average, one fifth (21%) of those assets are currently held in passive vehicles such as ETFs. Just under half (45%) of those investors plan to increase the amount they years. Only 5% said they plan to decrease two-thirds (68%) of institutional investors believe that the Covid-19 pandemic will accelerate the development and takeup of ESG investments further over the times, businesses have had to adapt in an access to healthcare, corporate culture and supply-chain sustainability are all core social (‘S’) ESG issues that rose to the

forefront during the pandemic. Corporate response will become more vital during tumultuous times as investors look at actions and behaviours as indicators of corporate culture.

Alessio Cirillo, Sales Director at Invesco EMEA, said: “In the Middle East, we have seen certain investor segments in the region further re-think their strategy post-COVID, as clients push to adopt ESG principles into investment processes. While climate change has been a growing concern among regional investors over the last two years, the global COVID health pandemic has really brought forward the social focus of ESG investing.”

According to a separate analysis of EMEA market flow data by Invesco, ETFs incorporating ESG criteria have been growing rapidly over the last five years, from USD 4 billion in assets under management (AuM) as in June 2015 to 5% of total AuM in Europe – as at the end of June 2020.

In an indication of the market focus on ESG, across the first half of 2020, USD 11.5 billion of net new flows were into equity ESG products in the EMEA region, with the rest of the equity ETF market seeing net outflows on an aggregated basis, according to Bloomberg data. By comparison only around 7% of the USD 19 over the first half of the year were into funds with ESG considerations.

Invesco’s survey among institutional investors found that half (51%) believe that the majority of flows into ESG ETFs ESG ETFs with a quarter (24%) believing

Corporate response will “ become more vital during tumultuous times as investors look at actions and behaviours as indicators of corporate culture. “

ESG ETFs. The latter is a relatively new but growing segment of the ETF market, with currently only 36 funds available in Europe, less than a third of equity ESG ETFs.

the growing number of investors looking for funds with ESG considerations, it is clear that ETFs are playing an increasingly Investors are often first attracted to ETFs due to their low costs and simplicity, but as we have seen so far this year, ESG ETFs have also been able to deliver on performance objectives.”

8.5% this year as of 4 September, versus 6.1% for the S&P 500. In the UAE, the has had a 9.3% return for the 3-month

Cirillo Alessio, Sales Director at Invesco EMEA

period ending 6 September, versus 4.9% same period.

Alessio Cirillo added: “Investors are looking more and more towards investments that align with their sustainability preferences and values. ETF providers have responded by offering an undesirable industries or with poor ESG scores or they could tilt the profile to reward companies that are industry leaders on key ESG issues.”

Invesco, as one of the largest providers of ESG ETF products, including a suite of MSCI ESG ETFs, a global equity multifactor ESG ETF and the first Sterling corporate bond ETF in Europe that incorporates ESG criteria. 43

FEATURE

Cooling fit for a King

building’s energy consumption by one-third

Air conditioning systems in the MENA region contribute to up to 70% of the total energy usage and operation costs of a building. According to a report by the International Energy Agency (IEA), if immediate action is not taken, the global energy use of space cooling is estimated to increase over threefold by 2050. This highlights the pressing need to reduce the energy consumption and provide 44 sustainable cooling, which can be achieved by retrofitting old energy inefficient buildings with a new generation of cooling technology.

Retrofitting benefits include huge savings in both energy consumption, electricity bills and emissions. One case study is the retrofit project Taqeef carried out on The Palace, a 20-year-old residential tower with 42 apartments in Deira, Dubai. The Palace’s retrofitting project was one of the first quantifiable Variant Refrigerant Flow (VRF) retrofits in the region and has since become a benchmark for success in cooling technology improvements to air-cooled chillers of the Palace were outdated, inefficient and took up too much electricity, the developer, Bu Haleeba, was looking for a HVAC partner to refurbish the air-conditioning system. As a solution to provide a more sustainable air-cooled chiller system and improve its performance and efficiency, Taqeef carried out a full retrofit to replace the three air cooled chillers and plant in the tower with a VRF system to cater for the individual apartments and common areas.

Taqeef was able to complete the new system upgrade while the residents remained in the building and the old chiller system was still operational. This kept costs and disruption to a minimum and reduced the need for any additional fit-out costs.

Instead of the single indoor units used for the chiller system, the installation of multiple indoor Fan Coil Units (FCU) was used for each individual apartment for metering for each apartment allowed the new system to largely operate at part load which delivered significant and immediate energy savings and the units also benefitted from reduced service costs and noise emissions. In addition to this, the new system reduced the administrative burden on the landlord. system upgrade was completed in only a year (2016-2017). Within just the first year of installation, independent Energy Management System (EMS)accredited auditors concluded that The Palace retrofit project delivered a 66% reduction in energy consumption and savings of almost to AED 400,000. Under the new VRF system, the annual chiller consumption dropped from AED 595,065 to AED 202,657. In addition, the new system delivered a superior end capacity, lower noise levels, and free individual control for each zone.

This retrofit project was able to demonstrate measurable benefits to the owner and occupiers of this building, making a clear and compelling case for the return on investment (ROI) of using new cooling technologies for old building stock.

Retrofitting is a key driver in meeting government targets for energy reduction and provides important contribution towards increasing the efficiency of buildings and their use of energy to reduce building impacts on human health and the environment.

The Palace project provides a perfect proof of what a successful retrofit can look like and how the high energy-use challenge can be overcome and provide unequivocal audit results with retrofitting old systems with new energy-efficient technologies.

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