Sustainable funds see highest flows across categories

Non-sustainable funds lose out as UK investors flock to their sustainable counterparts

UK investors are switching up their holdings favouring more sustainable fund offerings, particularly in the US equity space, according to Morningstar.

The latest direct fund flows commentary from Morningstar Manager Research UK found sustainable strategies were most popular within each of the equity and allocation funds in November 2021.

Furthermore, the report showed US equity funds lost out in favour of their global and sustainable equivalents.

However, the report highlighted the low number of sustainable products offered for the region: “Despite the US making up over 50% of the global equity market, the US large-cap blend and US large-cap growth categories saw net redemptions in November, in trend with the rest of 2021. High relative valuations in the US market and a much lower number of dedicated sustainable options may be reasons driving this seemingly contradictory investor behaviour.”

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Overall, £3.3bn was invested in November, with sustainable vehicles seeing £2.6bn in net subscriptions as “the shift into these strategies marches on”, the report said.

Total estimated net flows (m)

Sustainable?November 2021Over one yearTotal assets (£bn)
Yes2,57838,045157
No-3,654-13,3841,099
N/A4,3548,541105

Global large-cap and growth categories were the most popular categories in November, and have been best-sellers over 2021 overall, with passive sustainable vehicles from BlackRock and LGIM seeing the most flows – almost £1bn between them.

See also: – Responsible fund AUM doubles even as flows level

Meanwhile, Liontrust Sustainable Future Global Growth and Baillie Gifford Positive Change funds saw the highest flows in the growth category with £100m each. Royal London’s Sustainable Leaders Trust and Janus Henderson’s UK Responsible Income Funds were also the most popular in the UK large-cap equity and UK equity income categories respectively.

Morningstar also highlighted the equity ecology category was the only sector where every fund saw net inflow in November.

Hortense Bioy (pictured), global director of sustainability research at Morningstar and ESG Clarity Committee member, said: “Positive inflows into sustainable and ESG funds continued in November, with a particular focus on funds with an environmental theme. That’s hardly surprising given all the talks about climate change around COP26.”

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...