Responsible Investments

Responsible investment funds have seen continued outflows through the first quarter of 2024, maintaining the trend seen in the second-half of 2023. Investors pulled £725 million in the first quarter of 2024, slightly below the average quarterly outflow of £1.3 billion in the second half of 2023.

Equity and mixed asset responsible investment funds have continued to suffer the highest of outflows, with investors pulling £1.9 billion and £1,3 billion respectively through 2023. Meanwhile there have been some moderate inflows to responsible investment bond funds, with a net inflow of £88 million in 2023. Despite outflows however, responsible investment funds under management grew over 2023, from £91 billion at the start of the year to £102 billion by the end of the year. As a share of the industry, responsible investment funds went from 6.6% to 7.2% over the year.

Various factors are likely to have contributed to poor flows for responsible investment funds in 2023;

Investor memories of underperformance in 2022, when fossil fuel producers (often excluded by responsible investment funds) in particular saw strong performance.
Minimal representation among the best-selling sectors – money market funds, UK Gilts, and other government debt. Risk and return would appear to be the primary considerations for investment choice, with sustainability characteristics playing a secondary role.
U-turns on green policy by both the Labour and Tory parties, with public discourse moving away from sustainability and politicians scaling back green ambitions amid tighter financial conditions.