Finance

ESG boom generates 300% jump in revenues for asset managers

As assets overseen by Europe’s sustainable investment funds are swelling to record levels as the ESG boom makes millions of dollars in additional revenues for money managers.

Exclusive data provided to Financial News by Fitz Partners, a firm which specialises in fund fee analysis, show the management fees generated by sustainable vehicles have surged over the past two years, coinciding with increased investor demand for environmental, social and governance products.

ESG bond fund managers have been the biggest winners.

Fitz Partners estimates that ESG is responsible for generating fees of $44.4m for these funds, up 300.4% from the end of the final quarter of 2019. This coincides with a 273.3% increase in the average assets for ESG bond funds over the same period.

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Meanwhile non-ESG focused bond funds are estimated to be generating just 15.2% more in management fees compared to two years ago. However, they remain much higher at $3.52bn given there is a larger number of non-ESG bond funds on sale.

Equity funds with an ESG flavour have also won vast sums of new investor money, buoying average assets by 203.7% over the past two years. Estimated total management fee revenues have jumped by 192.4% to $330m during the same period, according to the analysis.

Meanwhile non-ESG equity funds — of which there are a larger number available to investors — have posted a drop in revenues over that timeframe from $5.44bn to $5.39bn, a decline of almost 1%.

“It’s a big jump in revenues,” said Hugues Gillibert, chief executive of Fitz Partners.

“If you have ESG labelled funds, you are experiencing between 200% and 300% increase, which is huge.”

The data from Fitz Partners covers the retail share classes of a sample of more than 3,000 Luxembourg and Dublin domiciled funds. The analysis does not include exchange traded funds.

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The bumper growth in revenues coincides with a significant increase in European ESG assets.

Separate data from Morningstar show global sustainable fund assets have almost doubled in the past six months to reach $3.9tn at the end of September 2021, with Europe accounting for $3.4tn of the worldwide total.

Inflows into sustainable funds represented nearly half of overall fund flows in Europe in the third quarter, according to Morningstar.

To contact the author of this story with feedback or news, email David Ricketts

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