Sustainable funds suffer from high energy prices

About the same proportion of sustainable allocation funds (78%) underperformed their peer group, and so did about half of sustainable fixed income funds (53%).

“This could be attributed to the underweight in oil and gas companies, which have outperformed the market for the year to date,” the report said. In Canada, very few sustainable products invest in the oil and gas sector. »

This lag in performance marks a change from 2021, where 57% of sustainable investment products in Canada outperformed their peers in the category for the full year, Morningstar said.

Flows to Canadian sustainable funds slowed in the second quarter to US$1.5 billion (all figures in US dollars). Active strategies lead the way, while passive funds saw inflows of $3.8 million. Almost all flows (88%) went to equity funds.

Assets of Canadian sustainable funds fell 8% quarter-on-quarter to $24.4 billion at the end of June, compared to a 13.4% decline for the overall market.

Product launches also slowed in the second quarter, according to Morningstar. Fourteen new sustainable funds entered the Canadian market in the second quarter, compared to 28 launches in the first quarter and 31 in the same period last year.

Globally, sustainable funds attracted $32.6 billion in the second quarter, down 62% from the first quarter, Morningstar reports.

“Amid investor concerns about a global recession, inflationary pressures, rising interest rates and the conflict in Ukraine, sustainable funds still outperformed the broader market, which suffered strong outflows of $280 billion in the period”, moderates the report.

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