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January 31, 2023

Everything Green Flows, 2022: Reports of ESG’s Death Are Much Exaggerated

by Dewi John.

Refinitiv Lipper’s analysis of environmental, social, and governance (ESG) investments in the UK market

Last year tested the resilience of ESG investing, as the growth and tech assets that were the mainstay of many “sustainable” portfolios looked anything but, and oil and gas led the market.

Given this, and the rising (and, indeed, justified) concern over greenwashing, concern over the future of sustainable investing grew. Google “death of ESG” and you get a plethora of articles in the financial press, especially over the summer. But, to paraphrase the hoary old Mark Twain quote, reports of ESG’s death have been much exaggerated. There was certainly a degree of volatility in flows—particularly in the third quarter—but as this report shows, in a market that has seen significant losses to both equities and bonds, sustainable assets have stayed in the black—unlike, in many cases, their conventional peers.

What we are likely seeing, however, is a shake-out in the sector: excess returns from ESG irrespective of the market are baseless, plus investors are becoming mindful of a regulatory tightening of the screws around vague and misleading formulations.


Please note that this report is narrowing its focus from broad ESG funds—those which indicate some form of ESG strategy in their fund documentation—to a smaller set of sustainable funds, defined as all SFDR Article 9 funds plus Lipper Responsible Investment Attribute funds reduced to those containing indicative sustainable keywords in the fund name.



  • Asset Class: Sustainable funds ex-money market attracted £27.6bn in 2022 as their conventional peers suffered outflows of £66.9bn.
  • Classification: Equity Global funds were the most popular sustainable classification, taking £14.1bn. Conversely, only 17 classifications saw outflows, totalling just £484.6m.
  • Performance: Sustainable equity funds have tended to lag over 12 months, although leading over three and five. UK funds are an outlier, with sustainable funds lagging over all three periods, but particularly so over 12 months.
  • Fund manager: BlackRock attracted £17.7bn of sustainable cash, £14.8bn to equity funds.

Sustainable v Conventional Flows by Asset Class

Chart 1: Asset Class Flows, Sustainable v Conventional, FY 2022 (£bn)

Source: Refinitiv Lipper


Total net flows, excluding money market funds, for 2023 were -£38.4bn. That breaks down to outflows of £66.9bn from conventional funds, and inflows of £27.6bn for sustainable funds. Of this, equities got the largest share (£21.2bn sustainable v -£56.4bn conventional), then bonds (£4.4bn v -£6.7bn), and then mixed-assets (£1.6bn v
-£2.6bn). The brown-to-green rotation is still discernible in alternatives and real estate funds, though here the inflows to sustainable funds are more modest: a little more than £200m in both cases.

So, while that undeniably unsustainable sector, traditional energy stocks, has powered ahead over the past year, sustainable funds have continued to attract money. Indeed, as indicated above, when narrowing the focus to more explicitly defined sustainable vehicles, the trend seems clearer.


Sustainable v Non-Sustainable Flows by Classification

Chart 2: Largest Positive Sustainable Flows by Refinitiv Lipper Global Classification, FY 2022 (£bn)
Versus Conventional Equivalents

Source: Refinitiv Lipper


Equity Global was the top-selling sustainable fund classification for 2022, with £14.1bn of inflows, as compared to its conventional equivalent, which shed £10.2bn. Being a more defensive way of approaching global equities, both sustainable and conventional Equity Global Income funds saw inflows, of £738m and £1.7bn, respectively, as conventional funds marginally outperformed (by -2.4% to -3.7%) over the year.

Likewise, sustainable Equity US attracted £2.9bn, while conventional peers saw outflows of £210m.

In what was a damaging year for fixed income, Bond GBP Corporates was the only bond classification to make it into the top-10 table, seeing £2.2bn of sustainable inflows and £1.8bn of conventional outflows.

An interesting codicil to this story is the money attracted by sustainable Equity UK funds (£1bn). Overall, this has been a long-term deeply unpopular asset class, with conventional UK equity funds suffering £14.7bn of outflows over the year. This despite the relatively good performance of the FTSE 100 at the same time, given its higher exposure to oil and gas stocks (see chart 4 for how Equity UK performance stacks up between sustainable and non-sustainable funds). Mixed-Asset GBP Balanced and Aggressive sustainable funds attracted £798m and £778m, respectively, although the latter classification saw much greater inflows into their conventional equivalents.


Chart 3: Largest Negative ESG Flows by Refinitiv Lipper Global Classification, FY 2022 (£bn)
Versus Conventional Equivalents

Source: Refinitiv Lipper


Despite the fears of an ESG exodus in 2022 sparked by a resurgent energy sector, with those quintessential oil and gas brown stocks being one of the few areas in positive territory over the year, this hasn’t translated into larger numbers prefaced with a negative sign. Only 17 classifications are in negative territory over the year, totalling outflows of £484.6m. Conventional flows for the same sectors were just under £17bn.

Indeed, the classification with the largest negative flow was Mixed-Asset GBP Conservative. As you can see from the chart above, that’s less than 5% of the conventional outflows from the sector, indicating that this isn’t a specific sustainable bad news story, but ESG flows being collateral damage in an already unpopular sector (we’ll be looking at the poor defensive showing of this sector in a year when investors really needed a foxhole to hide in, in a forthcoming article).

What is also interesting is that none of these classifications have a particularly strong ESG reputation—as does, for example, Equity Global. The one exception being Equity Theme—Water, which is almost by definition a sustainable theme—although here there are £74.8m positive flows into conventional funds in the classification.


Chart 4: ESG Top-Selling Classification Performance Versus Conventional Equivalents,
FY 2022 (Percentage Growth)

Source: Refinitiv Lipper


As one might expect, given the tilt to technology and growth stocks among global equity funds, and more so their sustainable subset, sustainable Equity Global funds outcompete.

The second most popular sustainable classification in 2022 was Equity US. However, the classification does not have a track record going back three years, so we’ve skipped it[1] (and money market GBP) and looked at Equity UK, which has turned up some interesting results.

UK conventional beat sustainable funds over all three timeframes, with the greatest difference being over 12 months—again, hardly surprising, given the outperformance of oil and gas. Even within the sustainable subset, the stronger performers—as a broad generalisation—tend to have a more large-cap and -core tilt, as opposed to the more multi-cap and growth-orientated 12-month laggards. What’s more, and despite the “sustainable” labelling, the better performers have a higher oil and gas exposure, which can be quite considerable (>8% in some cases). Clearly, the UK market is a difficult one for ethical investors: both in terms of delivering performance even when ethical funds tend to outperform elsewhere, and in terms of delivering a hydrocarbon-free portfolio.

Conversely, sustainable Bond GBP Corporates funds outperform their conventional peers over one, three and five years—albeit by less than one percentage point in each case. Duration may have a hand in this, as the average effective duration for conventional funds in the classification is 6, while for their sustainable peers it’s 4.9. The latter will have mitigated the negative impacts of last year’s punishing rate rises.


Chart 5: ESG Active v Passive Asset Class Flows, FY 2022 (£bn)

Source: Refinitiv Lipper


Active strategies took the most money for both sustainable bond and equity investments: 54% and 65%, respectively. You would need very high screen resolution to have seen the dent that ETFs made in these flows, with the vehicles taking 9% of the passive sustainable bond market and just 33 basis points (bps) of the equity equivalent over the course of the year.

Active flows for both equity and bond look healthier than in previous quarterly reports, which used a broader definition for our ESG universe. That would suggest that “lighter green” active funds display a similar trend flow-wise to their conventional equivalents, with investors making a distinction between these and the “darker green” funds considered in this analysis.

There are 41 sustainable passive bond share classes and 185 equity equivalents, demonstrating that sustainable passive fixed income remains structurally undersupplied, despite the relatively strong flows that sustainable bond funds are enjoying.


Flows by Asset Manager

Chart 6: Largest Positive ESG Flows by Promoter, FY 2022 (£bn)

Source: Refinitiv Lipper


BlackRock retains its lead for the year, attracting £17.7bn of sustainable cash, with £14.8bn of this being to equity funds, £5.9bn to bonds, and a sliver of £5m to mixed-assets. Schroders is the only firm in the top 10 to bring in any alternatives assets, at £198m. Aegon had the largest share of bond flows (£335m), and Vanguard the largest in mixed-assets (£254m).


[1] For the record, 12-month figures for Equity US are: ESG, -13.91%; non-ESG, -£13.92%. Enjoy that extra basis point

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