Europe continues to be at the forefront of sustainable investment

According to Morningstar, in the fourth quarter of 2021, Europe was once again the undisputed leader in bringing in assets in fixed investment funds. Nearly 80% of the money invested in fixed funds by investors around the world was invested on the old continent. Inactive funds are the mainstay in this regard – and significantly more so in the United States.

It has been clear for some time that sustainable investment should stay here and that it is not just lust. Globally, Europe continues to be at the forefront of this growth. Recent research by Morningstar’s ESG experts Hortense Bioy and Samiya Jmili makes it clear once again in the final quarter of 2021 that assets, including finals, will be credited.

Global fixed financial assets rose 9% to € 125.1 billion (or $ 142.5 billion) in the fourth quarter. At the end of the year, such funds totaled 2.4 trillion ($ 2.74 trillion).

Europe accounts for about 80% of total revenues for fixed funds. The United States has traditionally followed in 2nd place: only 10% of total attendance. Global fixed assets under management increased by 12% compared to the end of the third quarter of last year.

In line with such rapid growth many providers have introduced new fixed funds. And so it happened: in the fourth quarter, at least 266 fixed copies of fire baptism took place worldwide, bringing in 5,932 fixed funds worldwide.

As usual, Morningstar only includes funds that explicitly state that they will pursue consistent goals, in a prospectus, fact sheet or on their website – and that it also uses standard selection criteria. Funds that exclude only certain companies, such as tobacco or coal producers, are not considered ‘sustainable’.

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Large gap

There is a huge difference between different countries and regions in fixed investment. At the end of last year, less than 94% of total assets under the management of fixed funds were in European and US funds. Compare that to the rest of the world with just 5% of the remaining value.

If we look at the number of investors who invested region-wise in the fourth quarter of 2021, the ‘other parts of the world’, i.e. Asia, Australia, New Zealand, Japan and Canada accounted for 11% of global total returns.

The huge difference between the number of fixed funds in Europe – 4,461 – and the final level of all other countries, including the United States, is 1,471. The table below provides insight into the curve:

ESG Floes 2022-01 1

Coincidentally, Europe was the only region in the fourth quarter to see an increase in the amount of money that led to fixed funds, compared to the previous quarter. For example, in Asia, Australia, New Zealand and Canada, inflows were 13.5% lower in the third quarter than in the third quarter.

In Japan, it fell by more than 30%. But compared to the receipts for the same period of 2020, investors in the above regions have added more money to fixed investment.

Dormant funds are popular

If you look at the whole of 2021, fixed funds in Europe have attracted 63% less money than by 2020. Coincidentally, fixed investment funds received more money last year than they did two years ago.

Passive funds are popular among fixed investors: five index trackers out of ten funds in the top 10 in Europe. Surprisingly, 3rd and 5th on this list are fixed funds that did not even exist a year ago. At the same time, it is true that there is more money in total than inactive fixed funds. The majority of newcomers – about 80% – are inactive.

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