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Moody's - ESG investing a boon for asset managers as product skepticism diminishes

·10 min read
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Research Announcement:

Moody's - ESG investing a boon for asset

managers as product skepticism diminishes

New York, February 23, 2021 --

» ESG investment performance experienced a breakout year in 2020
» In 2021, ESG will be a key driver of industry organic assets under management (AUM) growth

Environmental, social and governance (ESG) themed investments have seen increasing demand

from institutional and retail investors, paving the way for continued growth for this strategy, which

is a credit positive for the asset managers that offer it, Moody’s Investors Service says in a new

report. In 2020, ESG products saw strong returns and investment outperformance that marked it as

a watershed year.
“The experience of 2020 will help remove investors’ worry that ESG investing means giving up

returns, which has been a widespread barrier to growth in ESG products,” according to Moody’s Vice

President Stephen Tu. “Before 2020 and the pandemic, ESG investments had met with frequent

retail investor resistance because of a commonly held belief that ethically motivated investing –

avoiding fossil fuels, for example – meant investors had to sacrifice profit and returns.”
Active equity products experienced record outflows in 2020. However, inflows into ESG products

have been consistently strong, growing upwards of 140% from 2019. Since 1995, ESG assets

have routinely grown at a compound annual growth rate of 14%, although the growth has picked up

rapidly since 2012.
Looking ahead, ESG investment products will be the next growth frontier for traditional asset

managers. Flows have been positive in recent years, and especially as investors and asset

managers now have a keener focus on ESG investment themes, ESG data and the incorporation of

ESG considerations in investment analysis and product construction. Even in a difficult environment

for equity performance, these investments have seen strong returns and AUM growth among asset

managers with a stronger emphasis in ESG products.
Subscribers can access the report “Funds & Asset Management – US: ESG investment

outperformance overcomes investor hesitancy, a key barrier to growth,” at:

http://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_1255037

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global

press information hotlines: New York +1-212-553-0376 , London +44-20-7772-5456 , Tokyo

+813-5408-4110 , Hong Kong +852-3758-1350 , Sydney +61-2-9270-8141 , Mexico City

001-888-779-5833 , São Paulo 0800-891-2518 , or Buenos Aires 0800-666-3506 . You can also email

us at mediarelations@moodys.com or visit our web site at www.moodys.com.
This publication does not announce a credit rating action. For any credit ratings referenced in this

publication, please see the ratings tab on the issuer/entity page on

www.moodys.com

for the most

updated credit rating action information and rating history.
Stephen Tu

VP-Sr Credit Officer

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Financial Institutions Group

Moody's Investors Service, Inc.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Evan Cybart

Associate Analyst

Ratings & Research Support

Moody's Investors Service, Inc.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Robert M. Callagy

Associate Managing Director

Financial Institutions Group

Moody's Investors Service, Inc.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Marc R. Pinto, CFA

MD-Financial Institutions

Financial Institutions Group

Moody's Investors Service, Inc.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody's Investors Service, Inc.

250 Greenwich Street

New York, NY 10007

U.S.A.

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653

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