Flows for long-only ESG strategies have been net positive for 13 out of the past 16 quarters. Investors on net allocated a total of +$119.3 billion to ESG products over that period. Equity strategies have seen the bulk of the inflows, with cumulative net allocations of +$61.3 billion to active equities and +$20.6 billion to passive equities. Global ESG equity products accounted for the bulk of inflows over the past 4 years, buoyed mostly by Europe-domiciled investors. U.S. ESG equity strategies have not been nearly as successful, historically, in terms of raising capital, but did post net inflows for the past 6 consecutive quarters totaling +$8.5 billion.
Quarterly Flows for Long-Only ESG Offerings (USD MM)
Source: eVestment Asset Flows
Investors allocated +$30.1 billion to ESG fixed income products on a net basis over the last 4 years, almost entirely to active strategies. Net flows for global bond strategies totaled +$13.4 billion and +$6.6 billion for U.S. bonds over the period, with the remainder spread across Canada, EM, Europe, and U.K. fixed income universes. Overall, flows look healthy for traditional ESG strategies with some room for passive strategies to play catch-up.
Next we look at ESG mandates issued by public plans. From 2018 to 2019, the number of ESG managers hired rose 50% from 12 to 18 and commitments made rose 49% from $3.9 billion to $5.8 billion. A linear extrapolation from prior year changes would have left ESG managers disappointed in YTD 2020 figures with commitments totaling $1.7 billion across 10 managers. Given the extraordinary circumstances, the 2020 figures do not strike us as signaling a diminishing interest in ESG. We note that certain mandates did not disclose commitment amounts and in those cases we utilize plan total assets, asset class current and target allocations, and other data to estimate the commitment amounts.
Public Plan ESG Mandates
Source: eVestment Market Lens
We also provide a breakdown by asset class across the 2018 – Q3 2020 period below. As mentioned previously, ESG mandates were generally dominated by global public equity strategies, even for the public plan segment.
ESG Commitments Made
2018-YTD 2020, Number Hired
Est. ESG Commitment Totals
2018-YTD 2020, USD MM
Returning to commitments made in 2020, we find ample room for public plans to make up for the relative lack of activity in the first 3 quarters. There are 48 ongoing and potential ESG mandates across public plans, keeping in mind that a single mandate can produce multiple commitments. While global equity mandates account for roughly 60% of the total, we also find interest for other offerings including Europe fixed income, private equity, and U.K. equity. Among those 48 ongoing and potential mandates, only 9 pre-disclose commitment amounts for a total of $3.2 billion. Completion of a fraction of these mandates would produce a healthy bounce for ESG mandates to end the year.
Figures and statistics in this piece are based on data provided to eVestment as of 1 October 2020.
ESG Data in eVestment
As interest in ESG increases, so does the need for deeper data on how managers implement their ESG approach.
That’s why eVestment launched a next-generation ESG questionnaire to provide investors worldwide with deeper data on how managers actually implement ESG at the firm and strategy level – not just their stated ESG philosophies.
Request a tour of ESG screening tools at firstname.lastname@example.org.