Canadian investment in sustainable funds doubled last year

Morningstar data shows fast growth of sustainable investing continued in 2021

Canadian investment in sustainable funds doubled last year
Steve Randall

The value of assets invested in sustainable funds in Canada continued to accelerate in 2021 according to a new Morningstar report.

During the year, C$34.5 billion in assets were invested in funds including ETFs, a significant jump from the previous year’s total of $17.4 billion.  

The fourth quarter alone posted a 10% increase ($2 billion inflows) and asset flows were positive in all four quarters, although the first quarter saw the biggest surge due in part to the RRSP deadline.

Broken down by asset class, equities saw the largest year-over-year growth at 110%, followed by allocation (89%), and fixed-income funds (62%).

Investors – many of whom had elevated savings that they wished to invest - had more choice of funds domiciled in Canada, with 73 new products launched in 2021 compared to 42 in 2020. Last year’s new funds attracted $3 billion in AUM, led by Fidelity Climate Leadership’s $543 million.

The sustainable funds space continues to be the domain of a handful of major asset managers - including NEI Investments, RBC, Mackenzie, BMO, IA Clarington, Desjardins, and AGF Investments - currently managing 80% of assets.

Actively managed strategies accounted for 85% of assets in sustainable funds, while passive strategies grew at a faster rate (160% year-over-year) than active strategies (90%) due to the smaller base of the former.

Ending on a high

The fourth quarter of 2021 saw performance of sustainable investment products continue to delight investors.

More than half of sustainable funds and ETFs outperformed their Morningstar Category peers with equity funds particularly strong. However, performance over longer periods was more in line with traditional counterparts.