Morningstar: ESG Funds Outperform in Growth and Returns in 2018 (February 2019)

The number of ESG funds grew by 50%, while money gushed in.

The number of sustainable investment funds has increased nearly 50% in the past year to 351, with total assets of $161 billion by the end of 2018, according to a new paper by Morningstar. A record number of those were launched in 2018 and more existing funds added environmental, social and governance criteria to their prospectuses, according to Jon Hale, director of sustainability investing research, who wrote the paper. In fact, there were 37 new funds launched last year, while 63 existing funds added ESG criteria.

This was surprising to Hale, who told ThinkAdvisor that the “flows continued to be strong relative to their past even during a year when overall fund flows were the worst they had been since the financial crisis.”

Thus, despite the un-favourable market conditions in 2018, sustainable funds attracted record net flows of $5.5 billion. In fact, it was the third consecutive year of record flows. Hale notes in the paper that positive sustainable net flows stand “in contrast with the overall U.S. fund universe, which netted its lowest calendar-year flows since 2008. Stock market returns in 2018 were the worst since 2008, and bond market returns were the worst since 2013, yet both ESG equity and bond funds garnered positive net flows.”

More remarkable, or perhaps not, was the performance of sustainable funds. Hale found that 63% of sustainable funds finished in the top half of their respective categories in 2018.

Articel by By Ginger Szala | February 14, 2019, ThinkAdvisor

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