Inflows into ESG ETFs More than Doubled in 2020 | ETF Trends

Socially responsible investments that follow environmental, social, and governance principles finally caught the break they were looking for.

Investors funneled a record amount of money into ESG funds last year, more than doubling the prior year’s intake, CNBC reports.

ESG funds attracted $51.1 billion of net new money from investors over 2020, which also marked the fifth consecutive annual record, according to Morningstar data. In comparison, investors funneled about $21 billion into funds that apply environmental, social, and governance principles in 2019.

Morningstar data also showed that ESG funds made up about a fourth of the all money that flowed into U.S. stock and bond mutual funds last year. Jon Hale, director of sustainable investing research at Morningstar, pointed out that it was a big year for ESG. The category accounted for 1% of inflows back in 2014.

The rapid growth and interest in ESG strategies come as investors, notably younger demographics, have become more aware of systemic issues like climate change and wealth inequality, according to Hale.

President Joe Biden has made climate change a core part of campaign trail and his administration, which is expected to translate to further support in environmentally friendly investments.

“We’re seeing so much money flow into [ESG funds] because we see investors enthusiastic about the concept,” Hale told CNBC. “They have these sustainability concerns and are starting to realize we can address those through our investments.”

The ESG fund space could gather more momentum if the Biden administration helps make it easier for businesses to offer sustainable funds to employees through retirement plans and 401(k)s.

“That market has trillions of dollars in it that’s not invested to a significant degree in sustainable funds,” Hale added.

For more news, information, and strategy, visit the ESG Channel.