Sustainable investment fund sales sky-rocket 131% in one year

Written by Rebecca Jones on 6th Aug 2019

Sales of ethical and sustainable funds more than doubled in June compared to the same time last year as British savers poured more than £230 million into investing in companies doing Good.

According to the latest figures from the UK Investment Association, net sales for what it describes as ethical funds (but covers anything ethical or sustainable) jumped 131 per cent last month to £234 million, up from £101 million in June 2018. This is one of the biggest jumps in year-on-year sales ever seen in the ethical fund sector and brings total sales over the past year past £1.4 billion.

 

 

 

Perhaps even more signifiant, though, is that the total amount of money in ethical funds grew by 16 per cent to £19.2 billion last month, from £16.5 billion in June 2018, while total money in all investment funds in the UK shrunk by 0.5 per cent from £1.25 trillion to £1.24 trillion, a loss of £5.8 billion.

This shows that while investors are selling out of mainstream investment funds, they are piling in to ethical funds in record numbers.

Commenting on this growth, John Fleetwood, founder of sustainable fund analyst 3d Investing said: “These figures reflect the surge of interest in sustainable investing following heightened concerns over climate change and the scourge of plastic.

“Ethical funds have also been boosted by the rise of ESG [Environmental, Social and Governance] investing which has increasingly wide acceptance as a way of managing financial risks. These trends are not going to reverse, and this marks the start of a step change to major growth of the whole sector.”

Hat trick

As we recently covered in our article ‘Why the investment fund industry is rushing to catch up on sustainability’, demand for UK ethical funds has exploded over the past three years, with sales to private investors rising 250 per cent from £371 million in 2015, to £1.3 billion in 2018.

These strong sales helped to push ethical funds’ share of the whole UK fund market up to 1.5 per cent in April this year, rising from 1.3 per cent in June 2018 where it has more or less hovered since 2009 (when it was 1.2 per cent). While the sector is still small compared to the whole £1.24 trillion UK fund industry, this growth is a sharp and sudden upturn.

At the same time mainstream UK funds are losing money, with total UK fund sales falling 124 per cent last year compared to 2015: from £22.6 billion to -£5.5 billion last year as a global market sell off hit mainstream funds hard.

This exodus from mainstream funds is continuing apace, with net sales for all investment funds currently standing at -£10.7 billion over the past year. At the same time, the total amount of money into ethical funds since June 2018 stands at over £2.9 billion.

Proof in the performance

The strong performance of ethical and sustainable funds may be helping to turn investors’ heads. As we pointed out in our previous post, the Investment Association’s (IA) failure to create an official sector for ethical and sustainable funds since the first one was launched in 1985 makes comparing their performance on a sector level impossible.

We also do not know what the IA classifies as an ethical fund, or indeed what funds they use to come to their estimations as they do not make these lists publicly or privately available.

However, as we frequently cover here at Good With Money, mounting research is beginning to show that investing sustainably makes more money than investing unsustainably as the tide begins to turn on companies destroying the planet.

This was underlined last week by a report from the Institute for Energy Economics and Financial Analysis, which that showed that BlackRock – both the world’s biggest investment house and biggest funder of the fossil fuel industry – has lost $90 billion (£74 billion) of client money over the past ten years by investing in the fossil fuel industry.

According to the report, 75 per cent of the loss is from its holdings in just four companies: ExxonMobil, Chevron, Royal Dutch Shell and BP.

Meanwhile, as we show in our bi-annual Good Investment Review and in our monthly top 10 performing sustainable investment funds series, funds investing in companies working to solve the issues facing humanity – including the climate crisis – are regularly and consistently outperforming their mainstream rivals.

Tom McGillycuddy, founder of impact investment app Tickr, says: “I am not surprised that ethical fund sales are only going in one direction. I think the trend will continue to accelerate. Performance is a key factor, as many new ethical funds now have track records that go beyond the critical 3-5 year mark. But, another key factor is shifting public attitudes and structural consumer shifts: people care more and more about where their money is being put to use, and this increased awareness isn’t going anywhere.”

The sustainable investment secret, it would seem, is out.

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