Inflows to sustainable funds held up better than conventional peers during the first quarter of 2022, a new report showed on Tuesday, but a big green bond fund took a hit as such debt faces headwinds.
Global sustainable funds drew $96.6 billion in net new deposits in the first quarter of 2022, according to the report by researcher Morningstar Inc, a 36% decline compared to the prior quarter but still better than the 73% decline in inflows in the broader fund market over the same period.
Hortense Bioy, Morningstar’s Global Director of Sustainable Research, said the trends showed sustainable fund flows can be more resilient. “Investors in sustainable strategies tend to be focused more on long-term returns and are less inclined to move money around in jittery markets than the average investor,” Bioy said via email.
The report also showed total assets in sustainable funds stood at $2.77 trillion as of March, a 4% decline from the prior quarter but also less than the 5.5% decline for the broader market.
The report covered 6,452 funds that claim to focus on areas like environmental, social or governance (ESG) factors. Their net assets at March 31 were still higher than they were a year earlier, around $2 trillion, and compared with around $1 trillion at March 31, 2020.
Passive fund managers continued to dominate Morningstar’s list of companies taking in the most money to sustainable funds, led by BlackRock Inc whose ESG-type products drew net new deposits of $10.9 billion in the first quarter.
However a BlackRock ESG fund, iShares Green Bond Index Fund, had the most outflows of any sustainable fund in the quarter, nearly $2 billion. Green bonds issued by companies to finance projects with environmental benefits face the same headwinds as other bonds, such as rising inflation.
In addition, Morningstar said, corporate issuers increasingly use sustainability bonds linked to specific ESG targets.
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