FT, Fitch Say ESG MMFs Growing
The Financial Times says "ESG money market funds grow 15% in first half of 2019." The article explains, "Money market funds that incorporate environmental, social and governance metrics are growing rapidly, with a spurt of activity by big asset managers such as State Street Global Advisors, BlackRock and DWS. Assets in the sector rose 15 per cent to $52bn during the first half of 2019, after growing 1 percent through all of 2018, according to research from Fitch Ratings. This pool of assets is still very small compared with the total $6tn money market sector.... Investor interest started picking up late last year, after DWS, a key participant in the sector, converted an existing US money market fund to be an ESG fund, said Alastair Sewell, senior director of funds and asset management at Fitch." The FT piece continues, "Amundi is the largest provider of ESG money funds and the majority of the market is based in Europe, but Fitch expects that to start to change. BlackRock and SSGA launched US funds in January and July, respectively.... Some observers doubt whether the growth is durable: Peter Crane of Crane Data, who tracks money market funds, said that the topic might be a 'fad' and it was telling that the largest money fund providers such as Fidelity were still waiting on the sidelines." It adds, "The money market funds using ESG criteria are prime funds, which invest in commercial paper and other private instruments rather than treasuries or other government securities. This means their primary exposure is to the financial sector. As such, governance -- one of the three pillars of ESG -- has always been an implicit consideration in the fund managers' investment decisions, Mr. Crane notes, questioning the need for ESG labels in the first place. 'If everyone's doing ESG, then why do you need ESG funds?' he asks." Note: Crane Data shows ESG money market funds as totaling $758 million as of June 30. We currently show none of the European money funds tracked by our Money Fund Intelligence International as "ESG" specific.)
