According to data released by global funds network Calastone, nine out of every ten pounds invested in equity investment funds in July went into an environmental or ethical fund – writes Kate James


Environmental social and governance (ESG) equity funds accounted for 90% of July’s equity fund inflows; with net inflows of £995 million, this was the second-best month on record for ESG funds.

Overall, inflows into equity funds were lower compared to previous months; July’s net inflow into equity funds was £1.12bn which was slightly below June’s £1.2bn and only around half of the average monthly inflow over the previous six months of £2.05bn.

Passive fund inflows also saw a large decline in July, with actively managed funds taking the majority of investor money; active equity funds saw net inflows of just over £1bn, while passives managed just over £40 million which was a steep decline from previous months when in both May and June, passive funds took in more than £500m.

Index funds had their second-worst month in over five and a half years, with inflows down 90% in July when compared to their long-run monthly average.

By contrast, active equity funds held up relatively well; July’s inflows totalled £1.08bn, which Calastone believes was partly thanks to strong demand for ESG strategies.

ESG goes sectoral

Calastone’s data also showed investors buying ESG funds in a wider range of regions than in the past. For some time, the majority of cash targeting ESG funds has been going into global equity funds – in 2020, 81% of ESG equity fund inflows were to this category.

However, this share is falling; in the year-to-date, ESG global equity funds accounted for two-thirds of ESG inflows, dropping to a record low of 52% in July, with investors increasingly opting for regional or sector-focused ESG funds.

Thus far this year, sector-based funds investing in areas such as sustainable energy, water, general environmental, and infrastructure have benefited from £764m in inflows which is two-thirds of all cumulative inflows since 2015. Demonstrating the growing popularity of such funds, in July, one pound in every four invested in ESG equity funds was sector-based.

Calastone analyses more than a million buy and sell orders each month, tracking flows in and out of investment funds from financial advisers, platforms and institutions; more than two-thirds of UK fund flows by value pass across its network every month
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