AUM in sustainable funds has touched a new record as per data from Morningstar.

A rush of inflows of $71.1 billion into ESG and sustainable funds globally between April and June this year pushed the AUM of such funds to a record $1 trillion, according to Morningstar. Investors have been drawn to such funds after the coronavirus outbreak. (CNBC)

Morningstar analysis

The analysts at Morningstar have attributed the record ESG inflows during the second quarter to the following factors:

• The COVID-19 pandemic had shown that companies need to rebuild their business models to include the interests of multiple stakeholders; these models needed to be sustainable and resilient
• A sharp jump in the number of products in the ESG universe had also spiked investor interest
• Asset managers were able to use many traditional funds and repurpose them into “green” products during the quarter

Figures from Calastone confirm the trend

Funds network Calastone reported that July saw record inflows of £362 million (€403 million) into ESG funds globally, according to Funds Europe.

Further, the firm said each of the past four months had set a new record for ESG equity fund inflows.

In another interesting statistic from Calastone, the cumulative total of £1.2 billion inflows into ESG funds since April was greater than all previous five years combined on record.

ESG a boon for active funds reeling from redemptions

“From 2015 to 2017, little or no new money was invested in ESG funds,” said Edward Glyn, head of global markets at Calastone, as quoted by FT. “[But] real momentum has been building in the last two years in the appetite for investment products that align with savers’ ethical concerns.”

The inflows have acted as a shot in the arm for active equity funds because they lost a lot of money to passive funds following the recent market turmoil.

“[ESG] is great for the [fund] industry because it’s active money that comes with higher fees, plus it’s something that investors want,” Glyn said.

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