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Nordea and Blackrock exploit record €36.9bn in sustainable flows

Morningstar calls for standardised approach to sustainability in prospectuses and Kiids


Jessica Tasman-Jones

Nordea and Blackrock are among the asset managers capitalising on record net flows to sustainable strategies as Morningstar calls on a more standardised approach to the growing universe of funds.

European-domiciled funds hit €595bn assets under management following record net flows of €36.9m in H1 2019, according to Morningstar’s inaugural assessment of the European sustainable funds landscape.

That figure closes in on €38bn of net flows achieved in all of 2018.

Over a one-year period, 63% of sustainable funds outperformed at least half their peers with 34.1% sitting in the top quartile and only 14.8% in the bottom quartile. Performance held up for the trailing five years with 59.4% of sustainable funds landing in their category’s top half.

Nordea and Blackrock rake in flows

In the first half, 168 funds launched in the space, which included ESG, impact and sustainable funds, but excluded funds that simply have a negative exclusion policy for sin stocks.

Among those launches was the iShares ESG Screen Euro Corporate Bond Index fund, which has taken in a “whopping” €920.1m since its launch in May, the report said.

The Nordea 2 – Global Sustainability Enhanced Equity attracted the most flows landing €2.4bn. Another Nordea fund, Nordea 1 – Stable Return BP EUR in the moderate allocation category, is the largest in the universe with €10.2bn assets under management.

Fund Category Net flows €
Nordea 2 – Global Sust Enh Eq Global equities 2.4bn
Sustainable Pension Return Allocation 1.3bn
iShares ESG Scrn Euro Corp Bd Idx € corporate bond 920.1m
GALLUS Aktien Welt passiv IB Global equities 866.4m
Vontobel mtx Sust EmMkts Ldrs Emerging market equities 818.0m
Stewart Inv Asia Pac Ldrs Asia Pacific ex-Japan equities 713.9m
State Street ACS Mlt-Fct Glb ESG IdxEqU1 Global equities 695.8m
NN (L) Liquid Euribor 3M B Cap € ultra short-term bond 640.1m
Northern Trust EMC ESG EI Ucits Emerging market equities 599.8m
Candriam SRI Bond Em Mkts Emerging market equities 549.3m

Blurred lines between traditional and sustainable investments

The inaugural research highlighted the challenge of categorising sustainable funds, said Morningstar director of sustainability research for Europe Hortense Bioy.

“There is a distinct lack of information in prospectuses, factsheets, and Kiids (Key Investor Information Documents),” Bioy said. “The language used in these documents is often unclear and lacks standardisation.”

She added: “Fund names cannot be relied upon in determining whether the underlying strategies incorporate ESG criteria and, if they do, to what extent.

“Some funds with key terms like ‘ESG’ or ‘sustainable’ in their names don’t seem so different from the growing cohort of traditional funds that are now formally considering sustainability issues as part of their investment process, engaging with companies, and screening out the least ESG-compliant companies. Thus, the line between traditional and sustainable investments is becoming blurrier by the day.”

Green bonds and thematics

The BMO SDG Engagement Global Equity Fund was among the launches highlighted in the report, which said thematics, climate-related and green bond funds were areas popular for fund launches in H1 2019.

The BMO Gam fund targets multiple themes that fall under the umbrella of the UN Sustainable Development Goals. Another thematic fund launched over the period was Mirova Women Leaders Equity, which focuses on gender diversity and empowering women.

There have been seven launches focused on green bonds over the six-month period, including NN Green Bond Short Duration Fund and CSIF (Lux) Bond Green Bond Global Blue Fund.

When it comes to climate change, UBS Equities Global Climate Aware Fund overweights companies that are well positioned to transition to a low-carbon economy and underweights those that are not committed to this transition. The THEAM Quant Europe Climate Carbon Offset Plan similarly focuses on the energy transition, albeit within European equities. It partially offsets its carbon footprint.

Eighteen fund launches were ETFs. UBS introduced an ESG version of its S&P 500 index tracker, UBS S&P 500 ESG ETF, while BNP Paribas launched the ECPI Circular Economy Leader ETF.

When it came to repurposing funds to introduce a sustainable bent, H1 2019 represented a slowdown from the surge of activity in the preceding two years. Over 40 funds repurposed in 2018, more than double the number from 2017, which until then had been the highest number on record.

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