ESG Funds Reach 11.7 Billion Under Management

Globally, ESG fund flows maintained a positive momentum from the end of 2022, recording $11.7 billion in inflows year to date. Cumulative inflows into ESG bond funds reached an all-time high of $244 billion, up 12.4% year-on-year. AUM in global ESG bond funds has increased from $490 billion to $495 billion by the end of 2022, despite recent market volatility.

ESG funds accounted for 10.5% of all fixed-income funds in February, up from 10% at the end of 2021, and little changed from 10.6% at the end of 2022. Both ESG and non-ESG bond funds recorded inflows year to date and ESG inflows accounted for 9% of total bond fund inflows.

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Western European ESG bond fund inflows

Western European ESG bond funds recorded inflows of $5.9 billion, representing just over half of global inflows. Cumulative inflows into ESG bond funds in Western Europe reached an all-time high of $109 billion, up 14.7% year-on-year. AUM in Western European ESG bond funds increased to $255 billion, down slightly from $256 billion in December 2022.

ESG funds accounted for 18.2% of all bond funds in February, up from 18.1% at the end of 2021, and down slightly from 18.2% at the end of 2022. The limited growth in the number of ESG funds could be due to the tightening of fund classification rules under the SFDR. ESG and non-ESG bond funds recorded inflows year to date and ESG inflows accounted for 32% of total bond fund inflows, the highest percentage recorded across all regions.

U.S. ESG bond fund inflows

U.S. ESG bond funds recorded an inflow of $1.3 billion for the year, investing an outflow of $757 million in December 2022. Cumulative inflows into U.S. ESG bond funds were flat at around $49 billion last year. AUM in U.S. ESG bond funds has increased to $92 billion, up from a low of $87 billion in October 2022. ESG funds accounted for 6% of all bond funds in February
of all bond funds in February, continuing an upward trend from 5.3% at the end of 2021 and 5.8% at the end of 2022. ESG fund inflows represented 2% of all bond funds, the lowest percentage recorded across all regions.

Emerging market ESG bond fund flows

Emerging market ESG bond funds recorded a monthly inflow of $399 million in February, despite an outflow of $4 billion for non-ESG bond funds. Cumulative inflows to ESG bond funds in EM increased to an all-time high of $21 billion. Cumulative volume in emerging market ESG bond funds increased to $30 billion, up from a low of $25 billion in October 2022.

ESG funds accounted for 5.5% of all bond funds in February, up from 5.3% at the end of 2021 and 5.7% at the end of 2022. ESG fund inflows now represent 9% of total bond funds to date.

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