ESG mutual funds greater than doubled in 2020
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Last year, investors poured record amounts into funds designed to help the environment and promote social well-being, and more than doubled last year’s income.
Funds that use so-called ESG principles can, for example, invest in energy companies that do not rely on fossil fuels or in companies that promote racial and gender diversity.
They received $ 51.1 billion in net new money from investors in 2020 – the fifth consecutive annual record, according to Morningstar. In 2019, investors poured around $ 21 billion into funds that apply environmental, social and governance principles.
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At the same time, ESG funds (also known as sustainable funds) made up about a quarter of the money that went into all U.S. equity and pension funds last year, according to Morningstar.
According to Jon Hale, Director of Sustainable Investing Research at Morningstar, that’s a record and a big jump from the 1% share in 2014.
Climate Change, Black Lives Matter
The millennial generation is beginning to “take its step,” said Hale. Young investors have more assets to invest and take on decision-making roles with investment institutions like foundations and pensions, he said.
“We see so much money in [ESG funds] Because we see investors excited about the concept, “said Hale.” They have these sustainability concerns and are starting to see that we can address them through our investments. “
More choice of ESG funds
Investors also have more choices than ever before, Hale said.
The number of sustainable funds available to U.S. investors rose to nearly 400 last year – a 30% increase from 2019 and a nearly four-fold increase over a decade, according to Morningstar.
In the meantime, ESG funding could get another boost if the Biden government wants to make it easier for companies to offer sustainable funding to employees in 401 (k) and other company retirement plans, Hale said.
“This market contains trillions of dollars that are not significantly invested in sustainable funds,” he said.