ESG bond funds received investor inflows of $54bn in the first five months of 2021, despite increasing “greenwashing” concerns as per Morningstar data. This compares to 2020’s full year inflows of $68bn. Total AUM increased 14% to $374bn between January and May, nearly tripling in three years. “There is a clear trend in favour of ESG growth, particularly in Europe”, said Jose Garcia-Zarate, associate director at Morningstar, adding that many fund managers are finding difficulty in “how to apply ESG principles to certain bond markets”. Whilst demand for ESG bond funds is mainly in Europe, various other regions are showing interest, including the US where sales of ESG bond funds hit $4.75bn in the first five months of 2021, compared to $5.92bn for all of 2020. Bryn Jones, who runs the Rathbone Ethical Bond fund, explained that demand for ESG bond funds is driven by regulations as well as a new group of millennial investors.
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