Interest among US investors in sustainable investment funds surged in 2019 amid mounting fears about the risks posed by climate change to the global economy.
Investors ploughed a record $20.6bn into US sustainable investment funds, almost quadrupling the $5.5bn of net inflows gathered in 2018, according to Morningstar, the data provider.
Assets held in the 300 funds surveyed by Morningstar jumped to $137bn at the end of 2019, up 54 per cent on the previous year end.
Morningstar restricted its analysis to funds that it judged had thoroughly integrated environmental, social and governance (ESG) standards into their portfolios. It also included funds that pursued sustainability-related themes as well as funds that provide sustainability metrics alongside financial returns.
This represents a tiny fraction of total US fund assets but large scale public protests demanding action on climate change are helping push asset managers to incorporate ESG measures into their investment processes.
“With growing interest in sustainable investing, especially among younger investors, 2019’s record inflows may be the leading edge of a huge wave of assets to come,” said Jon Hale, global head of sustainability research at Morningstar.
BlackRock last week signalled its determination to put climate risks at the heart of its investment decisions. Larry Fink, chief executive, said in his annual letter to CEOs that companies, investors and governments “must prepare” for a significant reallocation of capital because of the risks of global warming.
BlackRock plans to double the number of ESG exchange traded funds it offers to 150 by 2021 and to begin offering sustainable versions of its model portfolios.
Rival managers will undoubtedly follow with competing products. Expect the rush to launch more sustainable funds to accelerate sharply in 2020.
