Adviser interest in sustainable funds up since pandemic

Tuesday, 02 May 2023 08:54

Financial advisers have shown a significant increase in sustainable and responsible funds since the Covid-19 pandemic.

According to figures from data provider FE Analytics, sustainable funds now account for a larger proportion of its top 25 researched funds from the Investment Associations fund 'universe.'

FE researched data for the first three months of each year between 2019 and 2023.

It said that in 2019, only 28% (seven out of 25 funds) of the top 25 researched funds were environmentally-minded but this figure has now risen to 44% (11 out of 25 funds).

The year 2021 saw the highest number of sustainable funds make the list with just under half (48% or 12 funds) making the top 25.

Most Researched Sustainable Funds

First quarter of year (1 Jan – 31 March)	Number of sustainable funds in top 25 most researched in IA Global range	Percentage of top 25 researched funds	Percentage of top 10 researched funds
2023	11	44%	40%
2022	11	44%	40%
2021	12	48%	40%
2020	9	36%	30%
2019	7	28%	30%

Source: FE Analytics

FE says that it is possible that the searches could also have been generated by advisers looking to understand each fund better as many environmentally-friendly funds have underperformed in recent years.

Over the last five years, performance of many sustainable equity funds overall has been good, FE said. However, this performance has tailed off over the last two years, it said.

For the year to 31 March, all four sustainable funds in the top 10 most researched funds in the IA Global sector underperformed the sector average. Baillie Gifford Positive Change and Liontrust Sustainable Future Global Growth fund also underperformed the sector average in the 12 months to the end of March 2022.

Sustainable Funds Performance

Fund name	31/03/2022 to 31/03/2023	31/03/2021 to 31/03/2022	31/03/2020 to 31/03/2021	31/03/2019 to 31/03/2020	31/03/2018 to 31/03/2019
Baillie Gifford Positive Change fund	-9.32	2.06	79.30	15.93	11.01
Columbia Threadneedle Responsible Global Equity fund	-5.44	9.80	40.31	1.72	12.83
Janus Henderson Global Sustainable Equity fund	-3.91	10.99	44.24	7.19	8.98
Liontrust Sustainable Future Global Growth fund	-8.20	5.71	42.74	3.27	18.95
IA Global TR in GB	-2.65	8.39	40.59	-6.04	8.97

Top 4 sustainable researched funds in Top 10 most researched funds overall. Source: FE Analytics

In 2023, the third most researched fund within the IA Global sector – the top ranked sector for the opening three months of the year – was Janus Henderson’s Global Sustainable Equity.

Also in the top ten, were Baillie Gifford’s Positive Change fund, Liontrust’s Sustainable Future Global Growth and Columbia Threadneedle’s Responsible Global Equity who ranked fifth, sixth and eight respectively.

Charles Youness, research manager, FE fundinfo, said: “The need for firms to invest in sustainably-minded ways has grown in recent years with the increased interest and scrutiny in company’s commitments to ESG.

“In the past few years, especially, this has been heightened even further and we are seeing advisers research greater numbers of funds that meet their clients environmentally-conscious investment requirements.

“During the Covid-19 pandemic there was a noticeable increase in interest in responsible and sustainable investing. Regulatory initiatives and changed investor attitudes mean this appears to be a long-term change.”

• Data and insights company Agility, Research & Strategy, says its latest research suggests a trend towards sustainability among high net worth individuals (HNWIs). Its Global Millionaires 2023 TrendLens report, which gathered data and insights from HNWIs across Europe, the USA, and China, found that British and French HNWIs are the most "environmentally conscious" when it comes to making luxury purchases. Nearly 9 out 10 (87%) of UK HNWIs state that they would pay more for a sustainable brand, slightly less than the French at 90%. In comparison, only 67% of US HNWIs would pay more for a sustainable brand.