Investment in sustainable funds tallied an estimated $8.9 billion during the first half of 2019, according to Morningstar, easily surpassing the $5.5 billion of inflows reported for all of last year. It is set to be the fourth straight year inflows into sustainable funds set a calendar-year record.
Inflows set a quarterly record during the second quarter of the year with $4.7 billion, beating the record of $4.1 billion set the previous quarter. Both quarters smashed the previous quarterly record of $1.9 billion that had been set during the fourth quarter of 2016.
The largest net flows in the second quarter went to the iShares ESG MSCI USA Leaders ETF, which drew $1.4 billion. More than $800 million of that amount came from Finnish pension insurance company Ilmarinen at the launch of the fund. Exchange-traded funds (ETFs) took in 58% of overall flows for the quarter.
Another 15 funds attracted no less than $100 million in net flows in the second quarter, eight of which are passive equity funds, including two Vanguard funds, four iShares ETFs, and the Calvert US Large Cap Core Responsible Index. Five are actively managed equity funds, and two are actively managed bond funds.
Data showed that 138 out of the 271 sustainable open-end and ETFs available to US investors tracked by Morningstar had positive estimated net flows for the quarter of at least $1 million, while only 58 had negative net flows of at least $1 million. The rest of the funds had inflows or outflows of $1 million or less, while two funds saw negative net flows of more than $100 million.
All of the funds in the group integrate environmental, social, and governance (ESG) principles into their investment process, and/or pursue a sustainability-related theme, and/or seek measurable sustainable impact alongside financial return. The group doesn’t include funds that employ only limited exclusionary screens without a broader emphasis on ESG, or funds that only say they may consider ESG factors in their security selection.
BlackRock’s iShares attracted the most assets, while Calvert, which offers a full suite of ESG funds, drew an estimated $780 million. Vanguard also drew assets into its ESG funds, which now total four with the June launch of the actively managed Vanguard Global ESG Select Stock. The fund took in $57 million in its first month.
“For some time, we’ve seen growing levels of investor interest in sustainability but, in the fund universe, a lack of availability across the range of asset classes,” wrote Jon Hale, Morningstar’s head of sustainability research, on the company’s website. “With record numbers of sustainable funds launched since 2015, the supply side has been largely addressed.”