EFAMA released today a new issue of its Market Insights series titled ‘Sustainable UCITS Bond Funds for a Better Future'. This report highlights the strong demand for UCITS bond funds that apply ESG strategies in their portfolio selection, confirming the growing interest of investors for ESG products. It analyses the investment characteristics of this type of funds and compares their performance and fees with those of traditional bond funds.
The key findings of the report can be summarised as follows:
- Rising demand. Sustainable UCITS bond funds attracted EUR 102 billion of net new money in 2021, compared to EUR 69 billion for traditional UCITS bond funds.
- Strong asset growth. Sustainable UCITS bond fund net assets reached a record high of EUR 621 billion in 2021, representing 20% of UCITS bond fund net assets.
- Higher risk-adjusted returns. Sustainable UCITS bond funds have consistently recorded higher risk-adjusted returns than traditional UCITS bond funds during the last 5 years, thanks to a better risk-return profile.
- Lower fees. The average cost of sustainable UCITS bond funds has consistently declined since 2017 to reach 0.59% in 2021, compared to 0.76% for traditional UCITS bond funds.
Vera Jotanovic, senior economist at EFAMA, commented: “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. 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.”
Tanguy van de Werve, EFAMA Director General commented: “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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