Morningstar: Outcomes of the Q3 Global Sustainable Fund Flows Report

October 29, 2020

Morningstar has published it’s Q3 Global Sustainable Fund Flows report, which examined the global fund flows of 3,767 sustainable open-end funds and exchange-traded funds (ETFs) in Q3 2020 to find that assets in sustainable funds hit a record high of $1.2 trillion, up 19% from the second-quarter, while Europe surpassed the $1 trillion mark for the first time.

Supported by the continued stock market recovery and growing investor interest in environmental, social, and governance (ESG) issues, global sustainable fund inflows were up 14% in the third quarter of 2020 to nearly $81 billion. The U.S. accounted for 12% of the global inflows, while Europe continued to dominate the space with approximately 77%. Flows in the rest of the world rebounded considerably this quarter, clocking in at over $9 billion for Canada, Australia and New Zealand, Japan, and Asia combined.

Key takeaways are:

• European sustainable funds attracted inflows of EUR 52.6 billion in the third quarter of 2020. This is slightly down from EUR 55.5 billion in the second quarter, but this represents a bigger share (40%) of overall European fund flows.
• The strong inflows were driven by continued investor interest in environmental, social, and governance issues, intensified in the wake of the coronavirus pandemic, as well as the expansion of the sustainable fund universe.
• Assets increased by 10% over the quarter, reaching EUR 882 billion, or just over USD 1 trillion.
• Product development remained high, with the launch of 105 new sustainable funds, including 27 environment-themed products. These bring the number of sustainable fund launches in the first nine months of the year to 333 and the total of the European sustainable fund universe to a new record high of 2,898.
• Asset managers continued "greening" their offerings by converting at least 32 conventional funds into sustainable funds. Twenty-nine of these were also renamed. Repurposed funds now account for 22% of the European sustainable fund universe
• Meanwhile, there were notable delays to the progress of the Sustainable Finance Action Plan. The European Commission issued a letter indicating that the technical standards that will inform product manufacturers about their precise disclosure obligations will be delayed until 2022.

Hortense Bioy, Director, Sustainability Research, EMEA and APAC, comments: “The European sustainable fund space reached a milestone last quarter with $1 trillion of assets under management, an impressive feat when viewed against the backdrop of the COVID crisis. The steady Q3 inflows were driven by continued investor interest in ESG issues, intensified in the wake of the pandemic. Another contributing factor was the expansion of the sustainable fund universe, through new product launches and conversion of conventional funds. The high level of product development we’re seeing in the European ESG space is unprecedented and, in part, in response to the European regulator that is aiming to reorient capital towards sustainable activities and align to the EU goal of net zero carbon emission by 2050.”