Morningstar just released its latest cash flows report for sustainable funds/ETFs. The data for U.S. products suggests that the popularity of ESG investing continues to accelerate as inflows hit a new record of nearly $21.5 billion for the first quarter. That total was a slight increase over the prior period’s $20.5 billion and more than double the inflows of any earlier quarter.
As strong inflows continue, assets in sustainable funds are on a steady growth trajectory. By March 2021, U.S. ESG funds reached $266 billion, almost twice the total at the beginning of the year.
While sustainable funds are gaining traction in the U.S., they are rapidly becoming a core holding in Europe. Inflows into European sustainable funds hit a record $147 billion in 1Q21, roughly 7 times the U.S. figure for the quarter. In fact, for the second quarter in the past year, sustainable funds captured more inflows than conventional European funds.
We expect growth in ESG to continue to accelerate in the U.S. as:
• New funds specifically devoted to this category are introduced
• Current funds and related investment vehicles introduce ESG screening criteria as an enhancement to their existing investment processes.