Sustainable investment funds took “45% of overall European funds flows” during the fourth quarter of 2020, reports Morningstar. Photo credit: Waldemar Brandt/Unsplash
Demand for environmental, social and governance (ESG) funds grew sharply in 2020, particularly towards the end of the year, with asset managers increasingly slapping ESG labels on their products, according to recent reports from Morningstar.
Inflows rose by 84% in the fourth quarter, compared to the previous three months, and drew nearly half of all net European fund flows.
Total assets in European ESG funds, which screen fund portfolios by green, ethical and other responsible investing standards, topped €1.1trn as of 31 December.
Morningstar, a fund research firm, said that 505 new ESG funds were created and 253 existing European funds shifted to an ESG focus in 2020.
Nearly 90% of the refocused funds added the phrases “sustainable”, “ESG”, “green”, or “socially responsible investment” to the name of their funds.
“The record number of fund launches and repurposed funds in 2020 brought the total number of European sustainable funds to 3,196 funds,” Morningstar stated.
Morningstar said on 15 February that the EU’s forthcoming Sustainable Finance Disclosure Regulation, which starts taking effect on 10 March, will help “investors navigate the growing choice of products” and “aims to prevent product providers from exaggerating their funds’ green credentials.”