Fossil fuels are far from synonymous with ESG investing, but Russia’s invasion of Ukraine has upended the market. While many countries have made vows to cut global emissions and be net zero by 2050, that is getting put on pause as they are considering energy security first. Many euro funds have underweighted fossil fuels historically, but as of late almost 6% of ESG funds now own Shell which was previously zero at the end of 2021. The underperformance of funds is certainly a part of this and many are leaning on commodities surge in order to help recover. Moreover, the euro area has passed a regulation that includes gas and nuclear power as part of ESG. While some believe this is a good step because it encourages cleaner ffs such as natural gas others are worried it’s a slippery slope.

Finsum: This is a radical step in ESG regulation, and appears to be on pause as inflation has all countries concerned.

According to a study from Morningstar Indexes, pension funds and other asset owners in North America and Europe are adopting sustainable investment practices for their portfolios. Based on the “Voice of the Asset Owner” survey, which was based on 14 interviews with asset owners, pension funds saw ESG investments as a core element of investing. The asset owners stated that the inclusion of ESG investments was being driven by both their conviction in sustainable investing and client demand. The fund managers believe that ESG enhances their investment processes and does not subtract from investment returns. While implementing ESG can challenging due to shifting definitions and standards, their clients view climate as a big concern and are urging them to address global warming. While ESG has become a hot political topic in the U.S., pension funds are full steam ahead with ESG in their portfolios.

Finsum: Due to client demand and a conviction in sustainable investing, more and more pension funds are incorporating ESG strategies as a core element in their portfolios. 

Over the past four weeks, U.S. bond funds were seeing net outflows as the bond prices dropped. However, investors were net buyers of U.S. fixed funds in the week that ended on Wednesday with U.S. bond funds attracting a net $2.72 billion in purchases. This marked the first weekly inflow for U.S. fixed-income funds since June 1 according to Refinitiv Lipper data. Investors purchased $5.68 billion in U.S. government and treasury fixed-income funds, the biggest weekly inflow since October of 2018. Investors also purchased $1.59 billion in high-yield bond funds. The reverse in net flows can be attributed to increasing concerns over the economy. While fixed-income securities have seen their share of losses this year, U.S. debt is still considered a safe haven asset.

Finsum: After four weeks of outflows, US. fixed-income funds attracted $2.72 billion in net purchases due to economic concerns. 

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