Sustainable Ucits bond funds attracted €102 billion in new net money in 2021, bringing total net assets to a new high of €621 billion by the end of the year.
Sustainable Ucits bond funds grew much faster than their non-sustainable counterparts, which received only €69 billion in new net money last year, according to a report by the European Fund and Asset Management Association (EFAMA).
Sustainable Ucits bond funds now account for 20% of total Ucits bond fund net assets.
Investors are becoming more interested in ESG products in addition to their risk return profile, which has fueled growth.
"Sustainable bond funds appear well suited to meet the needs of investors who are looking for a favorable risk-return profile and sustainable and cost-effective investment solutions," said Vera Jotanovic, EFAMA's senior economist.
"Looking forward, we hope to be able analyse the portfolio composition of this type of funds and, in particular, the extent to which they invest in green bonds," says the researcher.
The report, titled 'Sustainable UCITS Bond Funds for a Better Future,' also discovered that fees for sustainable bond funds have been steadily decreasing since 2017, reaching 0.59 percent in 2021.
Traditional Ucits bond funds, on the other hand, charge 0.76 percent in fees.
EFAMA attributed the price reduction to increased competition in the sector, with many firms eager to drive sustainable fund adoption across traditional client banks.
"We expect the adoption of the European green bond standard and relevant market-led initiatives to boost the supply and demand for sustainable bonds and to have a positive impact on the development of Article 9 bond funds going forward. This would strengthen the EU leadership in the sustainable finance space," said Tanguy van de Werve, director general at EFAMA, says.
By fLEXI tEAM