Sustainable Investment Funds Near $2 Trillion in Assets | ETF Trends

Socially responsible funds attracted record inflows over the first three months of the year, bringing total global assets under management in environmental, social, and governance funds to almost $2 trillion.

According to Morningstar data, ESG funds crossed the $1 trillion mark in the second quarter of 2020 and accumulated $1.984 trillion by the end of the first quarter this year, CNBC reports.

Meanwhile, global sustainable funds brought in a record $185.3 billion for the first quarter of 2021, up 17% compared to the previous quarter. Additionally, overall assets in ESG-related funds surged 17.8% compared to the last three months of 2020.

“2021 began where 2020 left off with record demand for sustainable investment options across the globe,” Hortense Bioy, global director of sustainability research at Morningstar, told CNBC.

Europe remains the leader in ESG investing, accounting for over 79% of total fund flows, but other regions are beginning to allocate more toward the ESG category.

In the U.S., socially responsible investing is gaining momentum. Sustainability-related funds saw a record $21.5 billion in net inflows, or more than double year over year, up from $10.4 billion for the first quarter of 2020 and about five times more than 2019′s first quarter flows.

“Over the past year, a broad consensus on the need to address climate risk in investment portfolios has emerged,” according to Morningstar. “More investors see the green transition to a low-carbon economy as an investment opportunity. Asset managers are therefore rapidly developing new risk-management solutions, launching innovative products, and retooling existing ones to help investors decarbonise their portfolios and invest in green solutions.”

The “ESG” category has been a broad theme that can contain a number of different investment strategies, which is partly why it has faced calls for clearer standardized criteria.

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