Jon Hale: Hi I'm Jon Hale, global head of sustainable investing research at Morningstar, here to give you a quick recap on sustainable funds in the first quarter.
In February, I published my Sustainable Funds Landscape Report detailing the continued--and record--growth in the number of sustainable funds and ETFs now available to U.S. investors, and the record level of asset flows into those funds last year, despite difficult market conditions that made 2018 the worst year for flows into stock and bond funds overall since the financial crisis.
Those trends continued in the first quarter, with flows into sustainable funds topping $2 billion in January and February alone.
In March, DWS launched the Xtrackers MSCI USA ESG Leaders Equity ETF USSG with an $850 million investment from a Finnish insurance company, which immediately made USSG one of the largest ESG ETFs out there and allowed DWS to offer it at the extremely competitive price of only 10 basis points.
Vanguard, meanwhile, announced it would launch an actively managed ESG fund subadvised by Wellington Management later in the year. Vanguard launched two passive ESG funds last fall.
With so many funds adopting ESG criteria and growing interest in sustainable investing, it's becoming more important than ever to understand the differences among ESG funds--they’re not all the same--and there is no one way to apply sustainable investing criteria in an investment process.
So, I've identified four types of sustainable funds that can help you navigate that terrain, and I outline those in my Landscape Report, which is available to download.
Despite their differences, relative to their conventional peers, sustainable funds on the equity side have generally held their own in up markets and outperformed in down markets over the past several years. That held true in the first quarter of this year--as equity markets were up, sustainable equity funds generally performed on par with their conventional peers.
For Morningstar, I'm Jon Hale, thanks for watching.