[ad_1]
Investors spent $ 54 billion in the first five months of 2021 on bond funds specializing in environmental, social and government issues, despite growing concerns about the potential for “green cleaning”.
After several years bumper sales Among the equity products targeted at ESG, investors focus on fixed income funds, according to data collected by data provider Morningstar.
In total, sales of all ESG bond funds were valued at $ 54 billion a year through the end of May, compared to nearly $ 68 billion by 2020. The data is open-ended and exchange-traded funds around the world.
Assets in product management rose 14 percent from $ 374 billion in January to May, nearly tripling in three years. In 2020 alone, assets rose by 66% compared to a 12% increase in the total universe of fixed income fund assets.
The rise in demand has led to a rapid surge in new funds, and companies and governments have introduced social and green bonds to achieve this trend. But growing interest has raised concerns about so-called green cleaning, including the fact that some bond funds are not as durable as they seem and that fund managers are having difficulty deciphering ESG certificates.
Jose Garcia-Zarate, associate director of Morningstar, said “there is a clear trend towards ESG growth, especially in Europe,” but many fund managers are struggling with “how to apply the ESG principles in certain bond markets.” He proved that trying to label government bonds with ESG criteria was “very, very difficult” because “there is still no consensus on how to classify government and countries.”
Demand for ESG bond funds is piling up in Europe, but other regions have begun to see interest, Garcia-Zarate said. In the US, sales of ESG bond funds totaled $ 4.75 million in the first five months of 2021, compared to $ 5.92 million last year.
There is also a growing demand for passively managed ESG bond funds, which typically monitor indices. According to Morningstar, more than $ 17 billion has been invested in these products this year, surpassing a record $ 15.6 billion last year.
Colin Purdie, chief investment officer for liquid markets at Aviva Investors, which recently launched a climate transition-focused bond fund, said: “The ESG push is everywhere…. It’s not surprising to see funds being marketed.”
Morningstar data show that 122 new ESG bond funds were launched last year, with another 44 new offerings in the first quarter of 2021.
Purdie added that there have been challenges for fixed income investors when it comes to ESG: “It has been looked at that ESG is easier in stocks and one reason for that is because of the data,” he said.
In areas such as high yields or emerging markets, which are usually more speculative investments, disclosure of ESG data remains a problem. “There is a greater demand for resources in credit to ensure that you have the information you need,” he said.
Nonetheless, issuers have been racing to market with new permanent debt. BloombergNEF data provided $ 245.3 million in green bonds this year, $ 83.8 million in sustainability bonds and another $ 129.2 million in social bonds. In contrast, in the first five months of May 2020, $ 91.44 million in green bonds were issued, and another $ 15.21 million in sustainability bonds and $ 27.87 million in social bonds.
Bryn Jones, the Rathbone Ethical Bond fund, one of the oldest and largest ESG fixed income funds, said the green and social fund has “increased its supply”.
He said the demand for ESG bond funds was driven by a combination of regulations, such as an effort to take into account the impact of pension funds in the UK on ESG investments, as well as new cohorts of investors such as millennials and younger investors. they are interested in seeing that their money is good and generating profitability.
According to Morningstar, although demand for ESG bond funds has risen rapidly, they are less than one-fifth of total permanent fund assets.
According to a survey of Nordic and Dutch investments by NN Investment Partners in May, nearly half of those surveyed said they prefer green bonds to a fixed-income option. 81 per cent of pensions in the North and the Netherlands say they have already invested in green bonds.
Respondents also expressed concern about green cleaning companies, saying this was the biggest barrier to investment.
Simon Bond, director of responsible investment portfolio management at Columbia Threadneedle Investments, said that although there have been some cases where issuers have complained about this, the problem is not widespread. But Bond said more attention is being paid to cleaning up the green.
“That’s a good thing. The light is shining in that dark corner. It’s pretty hard to hide in this corner of the ESG when you’re shining that light,” he said.
[ad_2]
Source link
