2020 was a record-breaking year for ethical fund flows in the UK, with these funds netting £27.3bn – up from £11.1bn in 2019, according to research from Refinitiv Lipper.
UK ESG (environmental, social and governance) assets, defined as funds with an ethical flag, registered for sale in the UK and with the reporting currency in sterling, rose to £124.8bn – an increase of 28% year-on-year. The main money-taking Lipper Global Classifications over the year were: Equity Global on £11.8bn, Mixed Asset GBP Balanced on £2.3bn, Equity UK on £1.9bn followed by Bond Global EUR on £1.8bn.
With £33.9bn in total net assets, Equity Global now holds more than the next five classifications combined, with the largest ESG-badged share classes being ACS Climate Transition World Equity X1 Acc GBP, ACS World Low Carbon EQ Tracker X2 Acc (both from BlackRock), and Baillie Gifford Positive Change B Acc.
Money Market GBP comes in next, albeit at a considerable lag, with £12.3bn net assets, despite only two funds seeing much activity: Royal London Cash Plus Z Acc (£5.6bn total net assets (TNA)) and Blk ICS GBP Liq Envirn Aware Agency GBP Dist (£3.3bn).
ESG in the UK
Turning to UK funds, Equity UK and Bond GBP Corporates hold ESG assets of £11.2bn and £10.1bn, respectively. The largest ESG fund in the former is the Royal London Sustainable Leaders Trust, with £2.4bn across all share classes. It’s also enjoyed the strongest Equity UK ESG flows for the past year.
While Royal London funds also make a strong showing, both in terms of TNA and 2020 flows, among GBP corporate bonds, the Rathbone Ethical Bond fund—which netted £462m—was the big winner here.
Royal London, along with Liontrust, also has a dominant position within ESG mixed-assets flows. Last year, Mixed Asset GBP Balanced made a particularly strong showing, taking £2.3bn of its £6.2bn TNA.
Dewi John, Refinitiv Lipper Head of Research for UK & Ireland, commented: “Growing investor appetite combined with regulatory requirements means this lift-off in ethical investing is an ongoing trend rather than a one-year anomaly. How investors choose to deploy their money within an increasingly diverse ESG ecosystem will be the thing to watch.”