Sustainable Fund Flows Smashed Records in 2019: Morningstar

Investor flows into sustainable funds exploded in 2019, setting not just a new record but one almost four times the previous one, from 2018.

Flows into sustainable funds totaled $20.6 billion in 2019 compared with $5.75 billion the year before. Fourth quarter flows led the upsurge, jumping to $7.1 billion from $5 billion in all previous quarters last year.

“With growing investor interest in sustainable investing, especially among younger investors,  2019’s flows may be the leading edge of a huge wave of assets to come,” wrote Jon Hale, Morningstar’s head of sustainability research, in an article on the Morningstar website.

The Morningstar data is based on flows into mutual funds and ETFs that meet one or more of the following criteria:

• Integrate ESG factors into the investment processes, which Morningstar calls ESG Integration funds
• Pursue sustainability-related investment themes, called Sustainable Sector funds
• Seek to measure sustainable impact alongside financial returns, known as Impact funds

The flow data is based on several hundred funds. It does not include funds that consider ESG factors in a limited way or funds that use only limited exclusionary screens without a broader emphasis on ESG.

Despite the surge, sustainable funds pale in comparison to overall mutual fund and ETF flows, which reached $483.5 billion for the first eleven months of 2019, according to Morningstar.

— Related on ThinkAdvisor:

• Here’s How 3 Firms Integrate ESG Investing
• The 3 Phases of ESG Fixed Income Investing
• Advisors on ESG Investing: We Need Better Data
• Understanding Morningstar’s New Sustainability Ratings