Sustainable Ucits bond funds attracted €102 billion of new net money in 2021, to reach a record high of €621 billion in total net assets by the end of the year.
A report by the European Fund and Asset Management Association (EFAMA) found sustainable Ucits bond funds recorded much greater growth than their non-sustainable counterparts, which received only €69 billion in new net money last year.
Sustainable Ucits bond funds now make up 20% of the total net assets in Ucits bond funds.
The growth has been fuelled by investors increasingly interested in ESG products in addition to their risk return profile.
“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, senior economist at EFAMA.
“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.”
The report, titled ‘Sustainable UCITS Bond Funds for a Better Future’, also found the fees for sustainable bond funds tend to be lower, having constantly declined since 2017 to reach 0.59% in 2021.
In contrast, traditional Ucits bond funds have fees of 0.76%.
EFAMA pointed to increasing competition in the sector as the reason for this price reduction, with many firms eager to drive sustainable fund adoption across traditional client banks.
Tanguy van de Werve, director general at EFAMA, expects this market to continue developing, adding: “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.”
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