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Three-fold boom in ESG fund sales

18 February 2021

Responsible investment fund sales trebled in 2020 amid growing demand for socially conscious investing, according to the latest data from the Investment Association (IA). 

Responsible investment funds saw net retail sales soar to £10 billion in 2020, compared to £3.2 billion in 2019, with a record £1.1 billion recorded in December alone, as markets buoyed to a positive end-of-year position. Growing positivity around coronavirus vaccines helped boost stock market performance in December, which in turn fuelled investor appetite for stock and shares funds,  the industry body said.

Laith Khalaf, financial analyst, AJ Bell, said: “The limelight appears to have shifted away from passive funds towards ESG investments in the last year, with responsible funds recording a phenomenal year for fund sales. Indeed, the rising tide of cash flowing into ESG funds may also be playing a part in the shift back towards active funds, as this is an area where active managers dominate, for the moment at least.

“The ESG trend is likely to continue for the foreseeable after huge numbers of fund launches in recent years. Given the strong performance of these funds in 2020, it’s also likely that committed green investors are being joined by fund buyers simply looking to make good investment returns, given which way the geopolitical winds are blowing.”

Adrian Lowcock, head of personal investing, Willis Owen, commented: “Investing with social conscious made its mark and certainly entered the mainstream in 2020 with little sign of interest in ESG factors waning anytime soon.”

In total, net retail sales for 2020 across all funds reached £31 billion, with inflows in both the second and fourth quarters exceeding £10 billion. Equity funds proved the best-selling asset class of the year, attracting £10.4 billion and reversing 2019’s £2.9 billion net retail outflows.

Meanwhile, active funds attracted £12.4 billion in net retail sales in 2020, compared to outflows of £8.1 billion in 2019.

Chris Cummings, chief executive, Investment Association, added: “The fund market accumulated strong sales over 2020 and ends a tumultuous year with record funds under management. Continued economic uncertainty, set against the progress made on a national vaccine roll-out, means we enter 2021 with cautious optimism.”

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