Invesco ETF boss targets ESG for future growth

The ETF market has seen a variety of product launches in recent years, and consequently there has been a decline in the fees charged on these products.

But Mr Mellor said the same was not true for the ESG market, in which only a handful of ETFs were currently dabbling.

He said: "There are perhaps 30 ETF providers in the market, and 15 of any sort of scale. And within that, there are perhaps three that are currently offering ESG products, of which we are not one, but it is something we are looking at and I expect that within five years a lot more firms will have an ESG offering.

"The fees on a standard S&P 500 tracker are now so low that you would have to ask whether cutting by another basis point would actually make much of a difference to whether a client chooses one provider over another. I expect ETFs will continue to grow as a proportion of the investment market in the years ahead."

The ETF market has been growing fast and recent data from Bloomberg showed investors were still piling money into the products despite recent market turbulence.

Investors put a net £1.4bn into ETF products listed in Europe in the three weeks to 19 October, despite their exposure to US equity mandates, which had seen market turbulence some believed would have sparked a sell-off.

Mr Mellor said he has noticed more older affluent investors want to include ESG products in their portfolios, which he said was significant for the market because it was those investors who typically had larger pools of assets to invest.

Mr Mellor said he also expects stocks that are eligible for ESG portfolios to become more popular with active fund managers of non ESG specific portfolios, as investors in those mandates request fund managers to care more about those issues.

In contrast, Francis Klonowski, an adviser at Klonowski and Co in Leeds, said he has not noticed any increase in demand from clients for ESG mandates.

david.thorpe@ft.com