A feature of 2023 has been an intensification of the debate around sustainable investing and “greenwashing”.
For several years it seemed like neither the contentiousness of the issues at hand nor periods of poor relative performance dented the flows going to the sustainable sector.
But the latest Morningstar data indicates the tide may have turned this year, with a net £1.1bn pulled from sustainable funds in July.
Sustainable funds saw four months of outflows in the first seven months of 2023, according to Morningstar.
And that means sustainable funds are now in net outflow for 2023 year to date.
One of the funds to bear the brunt of this outflow is iShares Environment and Low Carbon Tilt Real Estate ETF, which has had a net outflow of £485mn during the month, and so is now in negative territory for the year, to the tune of £227mn.
It is owned by just one of the ESG allocators we cover plus two allocators of general portfolios.
The £1.1bn outflow can be seen in the wider context of non sustainable funds having an outflow of £2.7bn, while embattled Edinburgh-based investment house Baillie Gifford had another net outflow of £990mn, taking the total that has fled the firm in 2023 to over £4bn.
A glance at our database indicates that the Baillie Gifford sell-off is quite widespread, the Global Discovery fund has had two net sellers this year to date, similar to the Strategic Bond fund.
Fixed income was the asset class of choice during the month, with global corporate bonds attracting £546mn of new money, and government bonds £279mn of inflow.
Our database indicates the most popular corporate bond fund among the allocators we cover is jointly Artemis Corporate Bond and Rathbone Ethical Bond, each being owned by six of the allocators we cover.
But most of the inflows into the IA Corporate Bond sector were into a single fund, and one that’s unlikely to feature in any DFM portfolio soon: the recently launched Hargreaves Lansdown Corporate Bond fund, which had a net inflow of £529mn during the month.
Of the other four most bought funds during the month, three were passive instruments, including the iShares Corporate Bond Index fund, which is owned by three of the allocators we cover.
Among the fund houses to have attracted net outflows during the month were Abrdn, which shed another £105mn, Vanguard at £93mn, and Schroders at £112mn, though none of those firms had a fund feature among the list with the largest outflows, indicating the redemptions are broad based.
Fundsmith had a net outflow of £185mn in July, and is in net outflow territory for 2023, though it remains popular with the DFMs we monitor, being the joint most widely owned fund in the IA Global sector, appearing in seven portfolios.
