ESG inflows surge post-pandemic

ESG equity funds enjoyed record inflows in July, bucking negative sentiment towards broader equity strategies.

Inflows into ESG funds grew to £362 million in July, according to research by Calastone, with total commitments of £1.2 billion between April and July greater than all previous years combined.

Meanwhile equity funds shed £240 million in July, with UK equities a particularly weak spot.

The growing popularity of ESG funds has boosted inflows into global equity funds, with April to July being four of the best eight months on record for global fund inflows, with commitments totalling almost £3.1 billion in new capital.

Over the last year, one third of the money flowing into global funds has been committed to those focused on ESG investing; in June and July, this proportion rose to more than half.

Global equity funds have benefited from a huge marketing push by the fund management industry in favour of ESG funds, partly in response to very strong investor demand for ESG products and partly because they offer better margins for managers, said Edward Glyn, head of global markets at Calastone.

“Indeed, because ESG funds tend to be actively managed, they are also the one area of real strength for active equity funds, which are otherwise suffering at the expense of their passive counterparts,” he said.