As artificial intelligence and sustainability expectations reshape finance, the ETF community is taking note of the opportunities and challenges these shifts bring about. The ETF Express’ Global Outlook for 2026 explores critical questions for industry professionals: Can AI drive innovation in ETFs, indices, and distribution channels? Will ESG remain a significant trend in 2026?

• AI's role in investment growth: AI is expected to significantly contribute to the development of new indices, ETFs, and distribution channels, enhancing efficiency and personalization.
• Smarter index construction: AI enables index providers to create adaptive benchmarks, process large datasets, and identify emerging themes, supporting niche ETFs like thematic investing, ESG, and factor optimisation.
• Challenges of AI-driven innovation: Risks include product saturation, overly complex offerings, and reliance on AI for marketing without genuine investment insight.
• Personalisation in distribution: AI is enhancing wealth platforms and advisors' ability to tailor ETF portfolios to individual client goals and risk profiles.
• Efficiency gains and oversight: AI is streamlining processes in index creation and financial services, with robust oversight needed to mitigate risks of errors.
• ESG evolution: ESG is transitioning from a broad label to focused themes (e.g., clean energy, women-led companies, governance screens) and regulatory frameworks like the UK's Sustainability Disclosure Requirements (SDR).
• Environmental pillar growth: Despite ESG losing momentum, clean energy investments continue to grow, driven by demand for powering data centres and digital infrastructure.

AI is constantly referenced in investment publications – will it help or hinder the growth of new indices, new ETFs and new distribution channels?

Henry Timmons, Director of ETFs, Richard Bernstein Advisors

I first tried ChatGPT in December 2022. It seemed like a novelty: engaging but flawed. I remember using it during the Olympics and though improved, it was still flawed, giving contradictory responses to very similar queries.

I have no doubt AI will become ubiquitous in our lives. Just as the internet has become ingrained in how we live, AI will continue becoming more embedded in our daily lives. Whether AI helps or hurts us will be based on how we choose to engage with it.

Used appropriately, I believe AI is a powerful tool for calculating and summarising data. How we choose to interpret and react to the results is under our control. Creativity remains an area where AI is lacking, and humans can shine. I’m optimistic new launches will better serve the investor community and AI will likely contribute meaningfully with respect to new indices, ETFs, and distribution channels.

Henry Cobbe, Founder and Head of Research, Elston Consulting

AI will largely help the growth of new indices, ETFs, and distribution channels, though it will also raise the bar for differentiation. On the product side, AI is enabling index providers to build smarter, more adaptive benchmarks that can process vast data sets and identify emerging themes faster than traditional methods. This supports the creation of more dynamic and niche ETFs, particularly in areas such as thematic investing, ESG, and factor optimisation.

The proliferation of ETFs and indeed of Indexes, reflects the proliferation of ideas, not the number of shares available to invest in.

In distribution, AI will likely enhance personalization and efficiency, allowing wealth platforms and advisors to deliver ETF portfolios tailored to individual client goals and risk profiles. However, as AI-driven design becomes widespread, the challenge will be avoiding product saturation and “black box” complexity. Managers who combine transparent AI use with genuine investment insight will stand out, while those who rely on it purely for marketing may struggle to gain traction.

Irene Bauer, Co-Founder, Algo-Chain

AI is far more likely to enhance than hinder innovation in ETFs and index development. With robust oversight and validation in place, the risk of ‘AI mistakes’ should be eliminated. On the contrary, AI should be able to advance the index creation process just like it is of help already in so many areas of our professional life, speeding up whichever area we work on in the financial services industry.

Raymond Backreedy, CIO, Sparrows Capital

AI has the potential to reshape the ETF landscape in both positive and negative ways. On the positive side, it could streamline index construction, enhance data processing, and enable more personalised investment solutions for distribution platforms. However, there is a risk that AI-driven innovation leads to overly complex products that confuse rather than benefit investors. The technology might also fuel a wave of “AI-wrapped” marketing that doesn’t add genuine value. At this stage, its impact remains uncertain, but efficiency gains are the most likely near-term benefit.

Rusty Vanneman, Chairman of the Advisory Board, Main Management

I believe that AI isn’t replacing human judgment but enhancing it. From smarter index construction to adaptive factor exposure, AI is helping create more personalised, precise ETFs. I expect customisation and data-driven design to define the next generation of products.

Is ESG still a significant trend in 2026?

Henry Timmons, Director of ETFs, Richard Bernstein Advisors

What we referred to as ‘ESG’ will no longer be a major driver of ETF flows moving forward. However, I believe ESG paved the way for what we have today.

If you break the combined ESG model into its parts (environmental, social, governance), ETF solutions have attracted more focused investor interest. In the US, ETFs built around specific themes seem to have resonated more because their objectives aren’t muddied.

With a clearer objective, ETFs have morphed into continuing what ESG began. To name a couple examples, there are now ETFs focused on (E) clean energy, (S) women-led companies, and (G) strict governance screens. ESG has effectively unbundled into E, S, G.

Henry Cobbe, Founder and Head of Research, Elston Consulting

From a UK perspective, 2026 will be defined less by the broad ESG label and more by the implementation of the Sustainability Disclosure Requirements (SDR). The new framework is shifting attention toward transparency, credibility, and product integrity rather than marketing-driven sustainability claims. Fund managers are now focusing on how to classify, evidence, and communicate their sustainability objectives under the SDR regime. This marks an important transition from ESG as a catch-all term to a regulatory-led approach built on clear standards and accountability. As a result, the UK market is likely to see fewer but higher-quality sustainable products, with asset flows concentrating around funds that can demonstrate genuine, verifiable impact.

Irene Bauer, Co-Founder, Algo-Chain

While ESG as an all-encompassing investment theme has lost some of its early momentum, the environmental pillar continues to grow steadily. The demand for clean energy, particularly to power data centers and support digital infrastructure, is driving renewed interest in environmentally focused investments. This is true even in markets such as the US. To any doubters, it is worth noting that clean energy ETFs have been one of the best performing themes in 2025.

Raymond Backreedy, CIO, Sparrows Capital

ESG has lost momentum, with flows slowing and AUM declining due to weaker performance and political headwinds. While it remains important for many investors, ESG is no longer the clear structural growth story it once was. If markets turn, interest could rebound, making it more of a cyclical theme today.

Rusty Vanneman, Chairman of the Advisory Board, Main Management

ESG may no longer dominate headlines, but it’s now embedded in product design and corporate behaviour. I think the conversation has shifted from “if” to “how” and I expect integration and accountability over ideology.

These interviews have been published first by ETF Express.

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