The ‘green fever’ in investment accelerates

  • Global ESG funds manage $ 1.6 trillion, twice as much money as a year ago

While society has been attentive to the development of the UN summit against climate change, money is already showing signs that there are changes underway. “COP26 is an opportunity for the world and the asset management sector to come together and act,” they recently claimed from the manager Generali Investments Partners, asking the sector to “continue with its effort.”

Based on EPFR data collected by Bank of America (BofA), sustainability is in the sights of investors. In September, equity in more than 2,300 funds with ESG (Environmental, Social and Good Corporate Governance) criteria reached $ 1.6 trillion globally, double what it was a year ago. This figure also assumes that assets under management in ‘green’ funds grow three times faster than those allocated to funds that do not meet any sustainable factor, highlights the US entity in its latest report.

Specifically, 3 out of every $ 10 of global equity inflows went to ESG funds in the first nine months of the year. In total, investments in shares that have bet on the green through these vehicles rebounded 111% year-on-year, to exceed 230,000 million dollars. In the case of global fixed income, 1 in every 10 dollars has gone to ESG strategies until September. “2021 is on track to be a record year in attracting ASG assets”, in the eyes of BofA analysts, who foresee that interest in socially responsible investment has not yet reached a ceiling.

Apparently, the pandemic has helped. Now, more than half of investors (55%) believe that environmental issues are more important than before COVID-19 came into their lives. At the same time, 57% are more concerned about social issues than before, reveals the ‘Schroders Global Investment Study 2021’.

“In the last year, interest in sustainable funds has skyrocketed”, confirms Francisco Javier Garayoa, general director of Spainsif, an association that brings together different organizations – from finance companies, insurance companies or managers, through universities and business schools – interested in promote Socially Responsible Investment (SRI) in Spain. From this forum they have seen how in the last 12 years (from 2009 to 2020), assets managed with ESG criteria have multiplied “practically tenfold” in Spain, so they discard the “fads or passing trends”.

This is because, in his opinion, an economic paradigm shift is taking place with a direct effect on financial activity, “and sustainability has become an inherent factor.” Because while the pandemic has increased investor sensitivity, there are other triggers that are driving the acceleration. To begin with, public, national and international institutions continue to close agreements on the environment, economic recovery and social inclusion with which “managers and investors are already aligned,” says Garayoa. At the same time, firms generalize the supply of ESG products to meet demand, which is more pronounced in the case of institutional ones.

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The icing on the cake to complete this ESG-friendly ecosystem is the EU’s regulatory framework, which encourages transparency and investor protection in sustainable financial products.“says the CEO of Spainsif. Although a global consensus is still lacking, the entry into force in March of this year of the EU Sustainable Finance Disclosures Regulation has provided certain guarantees regarding the homogenization of the concept of sustainable finance in the market European.

At the end of 2020, SRI reached 345,314 million euros managed, 21% more than in 2019, according to the study ‘Sustainable and Responsible Investment in Spain 2021’ by Spainsif. In the past year, products with some sustainability characteristic were the majority, representing 54% of total assets, surpassing non-ESG for the first time. “It makes no sense to think in terms of ‘unsustainable’ financial products,” says Garayoa. The forecasts point to annual growth of over 15% in assets with ESG criteria for the next three years.

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