US Active Sustainable Funds Have Record Inflows

Shanny Basar
Europe Leads Sustainable Investing

Sustainable active funds in the US had record inflows in the second quarter of this year according to data provider Morningstar.

Alyssa Stankiewicz, a manager research analyst for Morningstar, said in a report that sustainable active funds attracted a record $8.4bn (€7.2bn).

Stankiewicz continued that US sustainable funds had assets of $304bn at the end of June, a 14% increase over the previous quarter and nearly double the $159bn record of one year ago.

“Active funds retain the majority (60%) of assets, but their market share is shrinking,” she added. “Three years ago, active funds held 82% of all U.S. sustainable assets.”

Total flows of $17.5bn into sustainable funds during the second quarter of this year dipped below the record $21.bn in the first quarter of this year.  However, they were higher than the $10.4bn in the second quarter of 2020.

“The broader U.S. fund market also saw lower net inflows for the period,” added Morningstar. “To put it in perspective, flows into sustainable funds dipped by 18% in the second quarter, but flows into the broader U.S. market dipped by 27%.”

Six of the 10 funds attracting the most flows in the second quarter of 2021 were passive funds,

Morningstar said: “It is notable that BlackRock US Carbon Transition Readiness ETF (LCTU) and its international sibling, BlackRock World ex US Carbon Transition Readiness ETF (LCTD), reached the top 10, as they only launched in April 2021. They join a growing list of funds focused on the transition to a low-carbon economy.”

All the 10 funds attracting the most flows in the second quarter of 2021 were in equities but flows into sustainable fixed-income funds have been growing after crossing $2bn for the first time in the third quarter of 2020.

“In the second quarter of 2021, they reached a new record at $2.7bn, said Stankiewicz.

In the US 25 sustainable funds were launched in the second quarter of 2021, just ahead of the record of 30 funds set in the third quarter of last year. Of those 25, 19 were equity funds, and 15 were exchange-trades funds according to Morningstar.

Global Sustainable Investment Review 

The Global Sustainable Investment Alliance said in its latest biennial Global Sustainable Investment Review 2020 released in July that global sustainable investment assets reached $35.3 trillion at the start of 2020. The total is up 15% since the previous 2018 report and now comprise 36% of all professionally managed assets globally.

The review said sustainable investment assets are the largest in the United States with $17.1 trillion, followed by Europe at $12 trillion, which together represent more than 80% of global sustainable investment assets.

Lisa Woll, chief executive of US SIF and the US SIF Foundation, said in a statement: “In 2021, the Biden Administration’s policy priorities and investor desire to address economic and racial inequality as well as climate change, among other critical issues, have fostered additional interest in sustainable investment in the United States.”

IPCC report

The Intergovernmental Panel on Climate Change (IPCC), the United Nations’ climate science research group, released a new report on climate change on August 9.

Fiona Reynolds, chief executive at the United Nations-backed Principles for Responsible Investment said in a statement that the report is a justified “red alert” on the future of our planet and that the financial services sector has a vital role to play in overcoming these challenges.

“The transition to a net-zero economy cannot be achieved without strong government leadership and robust action from the asset owners and managers alike,” added Reynolds. “We encourage investors to review their commitments to tackling climate change and to take action, by setting a net zero target and supporting initiatives such as Race to Net Zero and the UN-convened Net Zero Asset Owner Alliance.”

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