Assets in mutual funds which invest according to environmental, social and governance (ESG) criteria in Europe grew sharply in 2020 and should continue to accelerate, Europe's investment management industry body, EFAMA, said on Thursday.
Net assets in ESG funds grew to 1.2 trillion euros ($1.43 trillion) in 2020, up 37.1% from the prior year and compared to a 4.8% increase for non-ESG funds.
The surge in ESG assets has been driven by stimulus-driven market recovery and investors increasingly looking for resilient investments, as well as a push from governments to encourage environmentally-friendly investments.
The first part of the European Union's Sustainable Finance Disclosure Regulation (SFDR) was rolled out on Wednesday, aiming to make the ESG market more standardised and transparent. read more
Doing so should help increase confidence in the market, particularly among retail investors, which would accelerate the growth trends already in place, said Tanguy van de Werve, EFAMA's director general.
EFAMA's data referred specifically to "UCITS", a kind of mutual fund in the European Union.
ESG equity funds outperformed their non-ESG equivalents in 2020 because they were less exposed to sectors that were the hardest hit by the COVID-19 pandemic, such as energy and financial services, EFAMA said.
Sustainable equity funds have ballooned by 197% since 2016, while sustainable bond funds have grown 181% in that time.
Over the past five years the number of sustainable funds grew at twice the rate of non-ESG funds, EFAMA said.
Impact funds – a type of ESG fund which seeks to finance solutions to a particular issue that lead to a measurable impact – saw their assets triple since 2016, to reach 320 billion euros at the end of 2020.
Funds focusing on curbing carbon emissions made up 55% of these.
Renewable energy funds saw the highest growth (604%) in this period, while funds focusing on gender, diversity and community development grew 340%.