ESG investment funds more than doubled in 2020

Investors poured record amounts last year into funds aimed at helping the environment and promoting social good, more than doubling the previous year’s catch.

Funds that use so-called ESG principles can, for example, invest in energy companies that are not dependent on fossil fuels or in companies that promote racial and gender diversity.

They captured $ 51.1 billion in net new money from investors in 2020 – the fifth consecutive annual record, according to Morningstar. In 2019, investors invested approximately $ 21 billion in funds applying environmental, social and governance principles.

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At the same time, ESG funds (also known as sustainable funds) made up about a quarter of the money that was invested in all U.S. equity and bond mutual funds last year, according to Morningstar. .

That’s a record and a big jump from the 1% share to 2014, according to Jon Hale, director of sustainability investing research at Morningstar.

Millennials are starting to “hit their stride,” Hale said. Young investors have more assets to invest and are stepping up to decision-making roles in institutions that make investments, such as endowments and pensions, he said.

“We see so much money pouring in [ESG funds] because we see investors excited about the concept, ”Hale said. They have these sustainability concerns and are starting to realize that we can meet them through our investments.

Investors also have more choices than ever before, Hale said.

The number of sustainable funds available to U.S. investors rose to almost 400 last year, a 30% increase from 2019 and an almost four-fold increase in ten years, according to Morningstar.

Meanwhile, ESG funds could benefit from a new boost if the Biden administration seeks to make it easier for companies to offer sustainable funds to employees of 401 (k) and other workplace retirement plans. , Hale said.

“This market contains billions of dollars that are not significantly invested in sustainable funds,” he said.