Morningstar: European Sustainable Funds prove resilient amid COVID-19 sell-off in Q1

Morningstar: European Sustainable Funds prove resilient amid COVID-19 sell-off in Q1

ESG-investing
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Morningstar Manager Research has released European Sustainable Fund Flows data and commentary for the first quarter.

The flow data encompasses 2,528 mutual funds and exchange-traded funds domiciled in Europe that use ESG criteria as a key part of their security-selection process and/or indicate that they pursue a sustainability-related theme and/or seek a measurable positive impact alongside financial return.

Key takeaways include:

  • Sustainable funds domiciled in Europe showed resilience during the COVID-19 market sell-off. Driven by continued investor interest in environmental, social, and governance issues, the European sustainable fund universe pulled in EUR 30 billion in the first quarter of 2020. This compares with an outflow of EUR 148 billion for the overall European fund universe.
  • Assets in European sustainable funds dropped by 10.6% in the first-quarter of 2020, declining from a record high of EUR 694 billion at the close of 2019 to EUR 621 billion. But assets in the overall European fund universe took a greater hit, declining by 16.2%.
  • Sustainable funds started off the quarter on a positive note, with EUR 14 billion of inflows in January and a near record-high EUR 18.5 billion in February. In March, this corner of the market was not completely spared by the COVID-19 sell-off, registering EUR 3.3 billion of outflows. But these outflows remain limited relative to the EUR 245.5 billion bled by traditional funds which more than offset the inflows in the previous two months.
  • Over the quarter, active sustainable funds recorded a smaller drop in inflows than passive sustainable funds, the former declining by 26%, while the latter fell by 69%.
  • Among sustainable fund providers in Europe, BlackRock topped the leader board again in the first quarter with EUR 4.9 billion of inflows, followed by UBS and BNP Paribas.
  • Product development remained strong, with the launch of 72 new sustainable funds and the repurposing of 24 conventional funds.

Hortense Bioy, Director, Passive Strategies and Sustainability Research, Europe, comments: “The continued inflows in first-quarter 2020 speak of the stickiness of ESG investments. Investors in sustainable funds are typically driven by their values, invest for the long term, and seem to be more willing to ride out periods of bad performance.”