Assets in Canadian sustainable funds up $17 billion: Morningstar

Assets invested in sustainable funds in Canada grew to $34.5 billion at the end of 2021, up from $17.4 billion a year earlier, a report from Morningstar Canada says.

The doubling of assets last year is due to a combination of strong fund performance and net new investments, Morningstar Canada said.

The industry launched 73 Canadian-domiciled sustainable investment products in 2021, compared with 42 a year earlier. The new products collected $3 billion in assets under management, Morningstar said in its Q4 report on sustainable investments, released Monday.

Morningstar considers impact funds, funds that use ESG incorporation, and funds that invest broadly in environmental sectors to be sustainable. “So long as a fund has stated it uses at least one of these approaches in their prospectus or other regulatory documents, Morningstar will mark it as sustainable,” a spokesperson said.

Equity funds were most popular, attracting more than three-quarters (77%) of net inflows last year. Fixed income funds drew 18%, with the remainder going to asset allocation funds.

The sustainable investment fund and ETF market continued to be dominated “by a handful of heavyweights,” the report said. As of 2021, the heavyweight champion was NEI Investments, with $9.2 billion in sustainable investments, or 34% of the Canadian industry’s total sustainable fund assets.

Runners-up in terms of market share were RBC (12%), BMO (10%) and Mackenzie (9%).

Morningstar also ranked Canadian sustainable funds launched in 2021 by how much they collected from investors. The Fidelity Climate Leadership Fund, launched in May, led the pack, collecting $543 million from investors.

The RBC Vision Fossil Fuel Free Short-Term Bond Fund and the FÉRIQUE Global Sustainable Development Bond Fund — both of which were launched in January 2021 — collected $277 million and $236 million respectively.

Meanwhile, the Mackenzie Global Sustainable Bond ETF, launched this past September, collected $200 million from investors.

“Following another enthusiastic year of sustainable fund launches and ensuing interest from investors, Morningstar’s data shows the continued accelerated growth of sustainable funds in Canada,” stated Ian Tam, Morningstar’s director of investment research, Canada, in a release.