ESG funds accounted for 90 percent of inflows in July, according to the latest Fund Flow Index from global funds network, Calastone.
Its findings revealed that ESG inflows rose to £995 million in July, achieving its second-best performance on record.
More than nine-tenths of the ESG capital flowed into active equity funds.
2021 has also resulted in record inflows to ESG equity funds focused on Europe, North America, emerging markets, specialist regions and equity income.
This ESG gold-rush contrasts with the broader decline in equity fund inflows, as investors grow more concerned over global growth. Overall, net inflows to equity funds fell to £1.12 billion, around half the average monthly inflow over the last six months (£2.05 billion).
However, most of the impact was felt by passive products such as index strategies, with equity index funds suffering the most. Inflows dropped to £39 million, the second-worst month in over five-and-a-half years for the sector. Overall, inflows to passive funds in July were 90 percent lower than the long-run monthly average.
By contrast Inflows to active funds held up well, totalling £1.08 billion for the month, courtesy of strong demand for ESG equity strategies.
Since 2015, inflows to ESG equity funds have totalled £11.6 billion, with 99 percent flowing into the products since August 2019. The vast majority of this cash has been devoted to Global ESG equity funds – in 2020, for example, 81 percent of ESG equity fund inflows were into this category.
As it stands, ESG equity fund flows are concentrated in global equities, but its dominance is fading as other categories, especially specialist sector funds, garner investor attention
In fact, Calastone’s analysis demonstrates that investors are now increasingly fine-tuning their ESG fund purchases. Year-to-date, global ESG equity funds have garnered only two thirds (66 percent) of new ESG equity capital, while in July, the figure dropped to 52 percent, the lowest ever reading.
ESG equity funds with more targeted geographical or sector focus have begun to take a greater share of new inflows.
For example, this time last year ESG UK equity funds had still not made up for years of steady outflows pre-2019, but inflows have now picked up sharply, totalling £607 million year-to-date. In July, £1 in every £12 flowing into ESG equity funds was devoted to those with a UK focus.
ESG sector funds, a fairly new category which mainly comprises sustainable energy, water, general environmental, and infrastructure specialists, have been particular winners.
Year-to-date they have garnered £764 million in inflows, two thirds of all their cumulative inflows since 2015. In July £1 in every £4 flowing into ESG equity funds has been to this category.
