European sustainable funds attracted inflows of €52.6 billion in the third quarter of 2020, bringing total assets in sustainable funds to €882 billion according to figures from Morningstar.
Net inflows were slightly down from the €55.5 billion in the second quarter, but represented a bigger share (40%) of overall European fund flows. The strong inflows were driven by continued investor interest in environmental, social, and governance issues, intensified in the wake of the coronavirus pandemic, as well as the expansion of the sustainable fund universe.
105 new sustainable funds were launched over the quarter, including 27 environment-themed products. These bring the number of sustainable fund launches in the first nine months of the year to 333 and the total of the European sustainable fund universe to a new record high of 2,898.
Asset managers also continued ‘greening’ their offerings by converting at least 32 conventional funds into sustainable funds. Twenty-nine of these were also renamed. Repurposed funds now account for 22% of the European sustainable fund universe.
‘The high level of product development we’re seeing in the European ESG space is unprecedented and, in part, in response to the European regulator that is aiming to reorient capital towards sustainable activities and align to the EU goal of net zero carbon emission by 2050,’ said Hortense Bioy, Director, Sustainability Research, EMEA and APAC at Morningstar. Europe continues to dominate the sustainable fund space, with a market share of 77% and 82% for global inflows and assets under management respectively.
Strong trend towards ESG
Sustainable equity funds have now registered positive inflows in each of the past 12 quarters while conventional equity funds have seen declining inflows and even large outflows. In the past nine quarters, there has been only one quarter when sustainable equity fund flows have been lower than conventional equity fund flows. Following this trend, net flows into ESG-oriented equity funds were 82% higher than those into conventional equity funds in Q3.
Flows into sustainable fixed-income funds were also positive, pulling in EUR 13.1 billion, but lagged their traditional equivalent. This can be partly attributed to the more limited number of options in the sustainable bond-fund universe. Meanwhile, sustainable multi-asset funds attracted 26% more money (€7 billion) than their counterparts over the period.