Sustainable Fund Flows in 2019 Smash Previous Records
This could be the leading edge of a huge wave of assets into sustainable funds.
Sustainable funds in the United States attracted new assets at a record pace in 2019. Estimated net flows into open-end and exchange-traded sustainable funds that are available to U.S. investors totaled $20.6 billion for the year. That's nearly 4 times the previous annual record for net flows set in 2018.
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The flow data encompasses 300 mutual funds that thoroughly integrate environmental, social, and governance factors into their investment processes, and/or pursue sustainability-related investment themes, and/or seek measurable sustainable impact alongside financial returns.
The sustainable funds group does not contain funds that employ only limited exclusionary screens without a broader emphasis on ESG, nor does it contain the growing number of funds that now acknowledge that they consider ESG factors in a limited way in their security selection.
Flows picked up momentum over the course of 2019. During the fourth quarter, estimated net flows jumped to $7.1 billion, easily surpassing the record high for a quarter of $4.8 billion, set in 2019's second quarter.
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With growing investor interest in sustainable investing, especially among younger investors, 2019's flows may be the leading edge of a huge wave of assets to come.
Jon Hale has been researching the fund industry since 1995. He is Morningstar’s director of ESG research for the Americas and a member of Morningstar's investment research department. While Morningstar typically agrees with the views Jon expresses on ESG matters, they represent his own views.