Sustainable investing has already established itself as a trend, as the numbers speak for themselves. According to a report by Bank of America (BofA), inflows into ESG funds are double last year’s and could accelerate.
Thus, assets under management in more than 2,300 ESG funds worldwide reached a record $1.65 trillion in August, according to EPFR data, twice as much as a year ago and three times the growth of non-ESG funds.
“Year-to-date, $3 out of every $10 invested in equities is going into ESG funds. Although the pace of monthly inflows has slowed in recent months, 2021 remains on track to be a record year for ESG asset gathering, with flows in August and year-to-date more than double those of the previous year. And flows could accelerate by the end of the year if the seasonality trends of the past two years continue,” they note in the report.
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ESG funds, towards the energy sector and less towards the technology sector?
The bank also noted that ESG funds around the world are more underweight in energy than in any other sector relative to the benchmark index. “However, as we discussed in our recent launch of the ESGMeter for the Energy sector, the sector may not be as “brown” as it seems,” they explain and reference that some ESG funds may be recognizing this as well: U.S. ESG funds increased their exposure to Energy more than any other sector in the last month.
In addition, it is worth noting that U.S. and European ESG funds have reduced their exposure to the technology sector, which has long been a favorite of ESG funds because of its “green” reputation, but perhaps not always justified.
From BofA they also emphasize that 66% of the global ESG indexes they track have outperformed their regional (non-ESG) benchmark so far this year (through August 31), thus beating the one-year hit rate of 60%, but below the three-year hit rate of 71%.
“So far this year, ESG index performance has been most pronounced in emerging markets and North America, while the hit rate in other developed markets has been mixed,” they note.
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First published in Funds&MARKETS, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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