InvestmentsMay 4 2023

Popularity of responsible funds set to continue, IFAs say

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Popularity of responsible funds set to continue, IFAs say

Responsible investing is here to stay and its popularity will not decrease despite uncertainty over the future of value investing, advisers have said.

Inflows to funds deemed responsible by the Investment Association have slowed in recent months, with savers investing just under £300mn in March, compared with £916mn a year before.

This is against a backdrop of stalling fund flows, as volatile market conditions and high inflation deter consumers from investing their savings.

UK retail fund flows saw their worst year on record last year, according to the IA, with £25.7bn withdrawn overall.

Another £24.4bn of institutional fund outflows meant the total net outflow for the year was £50bn.

Resilient funds

Responsible investment funds grew as a share of wider funds under management in 2022, with the number of funds also rising in the year to 402, according to the IA.

For Scott Gallacher, director at Rowley Turton, the popularity of responsible funds is set to continue.

“While some may view this as a fad, the increasing focus on sustainability and social responsibility suggests that responsible investing is here to stay,” he said.


Responsible fund flows

March 2022




















January 2023






Source: Investment Association

A resurgence in the performance of value assets recently concerned some in the sector, who thought this could lead to a dip of interest in responsible investments.

Joshua Gerstler, chartered financial planner at The Orchard Practice said: "I think people like to invest their life savings responsibly if they are getting returns better or similar to those they would get from traditional investments,” he said. 

“If the returns are not comparable then the buzz of responsible investing starts to fade."

There is also the uncertainty over the introduction of the FCA’s fund labelling regime, after criticism by Chris Cummings, chief executive of the IA, who said the regulator needed to reconsider the proposals as they exclude too many retail investment products.

But for Kel Nwanuforo, investment specialist at Asset Intelligence, this does not change the fundamentals of the long-term picture.

“The global conversation about environmental, social and governance issues is only intensifying,” he said, highlighting the “uproar” that has greeted announcements of bumper profits from companies such as Shell and BP. 

There is also the political climate to consider, he said.

“Global policymakers have decisively set the direction of travel on climate policy and we’re not going back.”

Although he acknowledges that “returns are paramount”, personal morality and the desire to good “burns bright” in most people, particularly the younger generation.

“Alongside promoting sustainability, that lays the foundation for responsible investment to benefit from a sustainable future itself.”