There’s also been a chicken and egg situation in regards to investor demand and industry supply. A pick up in interest from investors has led to a flurry of fund launches in recent years, which has then created more investor awareness and demand. A virtuous cycle has formed, swelling flows into the virtuous bit of the funds industry. We can expect this cycle to continue as fund groups put their marketing weight behind their new ESG offerings, and as the recently launched spate of funds gain three and five year performance track records, making them more saleable and attractive to investors, advisers and professional fund buyers. Around a third of fund sales so far this year can be accounted for by responsible funds, and the trend is reminiscent of the passive fund surge we saw a decade ago.
The chart below shows the ESG fund launches over the last twenty years (not including closed funds). Clearly the last four years have been a hive of activity, though actually 2012 was the year which has seen the most fund launches to date. That may well be because the start of automatic enrolment encouraged fund groups to mistakenly believe that a flood of pensions money would start flowing into ethical investment funds.
Most popular ethical funds of 2021 so far
Below are the five most popular ethical funds with DIY investors on the AJ Bell Youinvest platform in 2021 to date:
iShares Global Clean Energy ETF
Baillie Gifford Positive Change
Liontrust Sustainable Future Global Growth
Royal London Sustainable World
Royal London Sustainable Leaders
