November 9, 2018

Interest in Socially Responsible Funds Rises

by Tom Roseen.

Interest in socially responsible investing (SRI) is on the rise. With investors being offered an alternative to “negative” screening, once the mainstay of the social investment focus, they are now given an opportunity to invest in funds to which managers apply positive screens. This new investment focus on the “best in class” practices of firms is also referred to as environmental, social, and governance (ESG) investing. Included in the group is “impact” investing, a focus on a particular subset of socially responsible investing such as affordable housing.

While actively managed U.S. equity funds (ex-ETFs) have witnessed net redemptions of $68.8 billion year to date though the week ended November 7, 2018, socially responsible equity funds have been an attractor of investor assets, taking in a net $1.0 billion on the mutual fund side and $1.4 billion for equity ETFs. Net inflows into SRI fixed income ETFs (+$97 million) have been dwarfed by those into conventional SRI fixed income funds (+$1.4 billion).

SRI funds combined have attracted some $4.0 billion year to date, slightly behind the full-year 2017 net inflows of $6.4 billion (+$1.6 billion for SRI ETFs and +$4.8 billion for conventional SRI funds).The broad-based SRI funds group (which includes ESG and impact funds and ETFs) has attracted the largest draw (+$2.2 billion) of net new money so far for 2018. The environmentally focused funds group has taken in $1.5 billion net, followed by $268 million into the green-oriented funds group and $4 million into the faith-based funds group.

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