Sustainable funds attracted $51bn of new investment in 2020, more than double the previous year, according to Morningstar, and on average, outperformed conventional funds and indexes,with potenbtial inducements from the Biden administration likely to further increase their pull.

Despite the turbulent events of 2020, investors are embracing sustainable investments, with one study now estimating that 1 in 3 dollars of overall assets under management in the U.S is now subject to some type of sustainable investment strategy.

The options are increasing too, with the number of sustainable open-end and exchange-traded funds available to US investors increasing to 392 in 2020, up 30 per cent from 2019. In 2020, 71 sustainable funds were launched, and 25 existing funds were repurposed as sustainable funds in 2020.

Morningstar concludes that several key factors contributed: First, the growth of the sustainable funds universe since 2015 has given investors a sufficient number and range of options from which to select.Second, as more sustainable funds build competitive performance records, lingering doubts about underperformance have diminished.

Another, third and final elements, is that the “precarious state of the world” has led investors to want to create a positive impact, with funds increasingly interested in demonstrating to their investors the broader impact of their investments and their stewardship activities.

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