ETF TV News #77 Steve Hawkins of Horizons ETFs discusses the demand for ESG ETFs in Canada

Presented by Syntax Advisers.

Deborah Fuhr: Welcome to ETF TV News – a weekly show that provides insights for institutional investors and financial advisors on global trends in the ETF industry in the prior week. I’m Deborah Fuhr and joining me today is Steve Hawkins, President and CEO of Horizons ETFs in Canada. Welcome, Steve.

Steve Hawkins: Deb, thanks very much for having me here today.

Deborah Fuhr: So last week you launched an S&P green bond ETF. Can you tell us about that product?

Steve Hawkins: Yeah, Deb, I mean, we’re very excited about HGGB. It’s the first true green bond ETF here in Canada, investing into clean transportation, renewable energy, pollution clean up. These are all exciting fields. There’s more and more green bonds being issued on a global basis from a developed markets and emerging markets perspective, and this ETF is really going to cover the gamut of all of the green bond investing overall. And again, this is a first of its kind here in Canada, so we’re excited to see how investors will really react to a new product like this.

Deborah Fuhr: What type of investors do you expect to be using this ETF and how do you see them using it?

Steve Hawkins: So we really structured this ETF for the self directed and retail advisor out there and the end client who is conscious about how they want their money spent at the end of the day. And they’re talking to their financial advisor and saying, ‘I think I want to invest more into green initiatives, ESG type mandates.’

And, you know, it’s really for the investor that is now thinking about how they want to spend their money. Are they looking forward to a better world for their children and for their grandchildren? So it’s an exciting time for the ESG space, specifically. This is a new product which doesn’t exist in Canada. And all of the money is geared specifically towards green initiatives, so it’s for the client that can really think about, ‘hey, what’s going to happen to this world, to this environment over the next 10, 20, 50 years?’

Deborah Fuhr: We know that Europe has really embraced ESG – about 53% of all the assets and ESG products are in European products. How do you see the demand for ESG investments in Canada shaping up?

Steve Hawkins: Canada is way behind Europe. And, you know, I think we’ve recognized that for a while. And I guess the US is even farther behind Canada from a money-going-into-the-ESG-space perspective. Right now, the Canadian ESG SRI space is really driven by the institutional marketplace. They’re the ones who’ve been putting all of the dollars into these types of things, but they’ve been doing it themselves. They don’t use ETFs say for this type of mandate, but we see that potentially changing a little bit over time here.

Right now in Canada it’s maybe 10% of what you’re seeing from a European investor perspective. And then we see in the US it’s even worse, it’s 5%. There’s a lot of ESG and SRI products available now here in Canada. Europe has been a leader for a long time when it comes to the space, and that will trickle down hopefully at some point and become a waterfall with respect to more money having to be invested into the ESG space here in Canada.

Deborah Fuhr: From your perspective, what are the things that you’re looking at in terms of launching new products or other trends for the rest of the year?

Steve Hawkins: 2020 was such an unusual year, there was so many different things that happened. I mean, the tech craze that went nuts. We saw thematic ETFs just take off in the US completely. And the Canadian market is lagging from the US in that perspective. But we see very niche types of products as a necessity to this marketplace, and the market is getting sliced and diced more and more every single day. We’ve launched eight products already this year. We probably have at least ten to 15 more that will be launching. And I would say they’re all going to be very, very focused from a sector-themed type of mandate.

I mean, we’ve already filed a prospectus for a lithium product, which doesn’t exist here in Canada, a hydrogen product which doesn’t exist here in Canada, and semiconductors. And those are all three very big themes that we’ve seen a lot of money going into in the US, but really haven’t touched the Canadian market at all, so those will be our next three projects. And then right after that, we have another series of thematic products. But you can’t forget about income. Canadian investors find income in all different spots, so we’re going to be coming to market with some income products as well, and that’s one of the reasons why we’re happy with the global green bond ETF. It kills several birds with one stone, one, it’s the first of its kind from a true green bond perspective and still gives them the income at the end of the day that they’ll be looking for.

Deborah Fuhr: Thank you, Steve, for joining us and sharing that update.

Steve Hawkins: Deb, always a pleasure.

Deborah Fuhr: Last week, we had 20 new listings from 16 issuers on nine exchanges. When we look at the products that came to market, there were 14 in Asia, Korea had seven leveraged and inversed ETNs, ESG was the one product in Australia. In China, we saw that there were five products, and in Hong Kong, the first ETF as part of the cross-listing scheme was listed by CSOP.

Turning to the US, TrueShares did a Structured Outcome ETF (JUNZ), WisdomTree did a bio-revolution ETF (WDNA US), Defiance had a hotel and airlines product (CRUZ). In Europe, we had a space ETF (YODA), and a sports and betting ETF (BETS), and we heard about Horizon’s ETF (HGGB). So the themes are consistent. We’ve seen year-to-date; ESG, thematic ETFs, disruptive technology, and structured outcomes. The other news is the ETF industry has broken through that nine trillion dollar milestone, and more updates to come next week on that.

I’d like to thank Syntax Advisors for sponsoring ETF TV. I’d like to thank you for watching this episode. I’d also like to thank Steve Hawkins for joining us. If you’re interested in prior episodes, go to ETFTV.NET. Thank you.

ETF TV News does not provide investment advice nor recommend products.

Published on June 8, 2021