Inflows into environmental, social and governance (ESG) related equity funds have soared 72% over the past year, according to research from Credit Suisse (NYSE:CS.), though many renewables shares have seen a decline in popularity.
In a new piece of global research, the investment bank noted that equity inflows more than 2,000 ESG funds globally last month reached US$95bn, representing an annualized growth rate of 72%.
Most of the flows are in Europe, with over 70% share of new money and 76% of overall assets under management.
The research analysts observed that ESG outperformance has continued despite the alpha, ie the difference between a fund's expected returns and its actual returns, having dropped somewhat from over 5% in December 2020 to 1.35% currently.
High exposure to technology and low exposure to energy worked as alpha generators last year but “proves more challenging in 2021”, the analysts said.
The wind has been taken out of many renewables stocks, Credit Suisse noted, with the likes of SolarEdge Technologies Inc, Xinyi Solar Holdings, Ørsted and especially Vestas Wind Systems experiencing a sharp decline in popularity.
“Electric vehicles and energy storage names such as Tesla Inc (NASDAQ:TSLA), BYD Company and LG Chem suffered a similar experience.
“Companies exposed to energy efficiency and the energy transition appear to have benefited,” the analysts said, with examples being Siemens Ltd, Iberdrola AS and Signify NV.