A record number of ‘socially conscious’ mutual funds and exchange-traded funds were launched by asset managers in 2018, keen to tap growing demand from retail investors.
A total of 382 such funds were launched globally to take the total to 3,160, industry tracker Morningstar said. Collectively, they manage $1.2 trillion in assets, double the $622 billion managed in 2009.
Total flows into the funds were $39 billion, down from the prior year’s $72 billion, in part as a result of weaker investor sentiment that saw global stock markets sell off on fears tighter central bank monetary policy could hit economic growth.
“Over 2018, you really saw ESG adopted across the industry,” said Morningstar analyst Anastasia Georgiou, referring to the environmental, social and governance-related issues (ESG) that help determine what to include or exclude from the funds. However, there is currently no clear-cut regulatory or industry standard for ‘sustainable’ investing, a gray area policymakers are concerned could mislead investors.
“Most of the industry seems to have adopted ESG, but how people are applying it is different. From an investors’ perspective they want to be able to compare these ESG measures on a like-for-like basis,” said Morningstar’s Georgiou.
Calls from policymakers for better oversight of the sector have become louder as governments, particularly in Europe, look to help the financial industry better allocate capital in the global fight against climate change.