Fitch Global ESG MMF Dashboard
Fitch Ratings published a "Global ESG Money Market Fund Dashboard: 2020" earlier this month, which tells us, "Fitch Ratings estimates that assets under management (AUM) in ESG money market funds (MMFs) increased by around 50% by end-2020 to EUR123 billion. Growth in all MMFs in 2020 was around 20% to USD7.3 trillion. ESG MMF growth was primarily driven by funds converting to an explicit ESG approach -- around 66% of ESG MMFs by AUM are conversions of pre-existing funds. About 60% of ESG MMFs was launched or converted in 2019 or 2020." Fitch continues, "ESG MMF AUM remains concentrated in France. The largest French ESG MMFs are 'standard' MMFs under applicable European regulation and typically have a broader investible pool of assets than US 2a-7 or European 'short-term' MMFs, including more corporate exposure. Fitch defines ESG MMFs as those that explicitly present themselves to market as ESG MMFs, whether through the fund name, stated investment objectives or stated investment characteristics." They comment, "Traditional MMFs have responded to growing investor interest in ESG by adding language to their prospectuses describing how they address ESG considerations in their investment processes. The umbrella fund prospectuses of nine Fitch-rated European short-term MMFs featured ESG language as of end-January 2021.... On a like-for-like basis, Fitch estimates this is an increase of around 10% yoy (see: Global ESG Money Market Fund Dashboard: End-2019, published 12 February 2020). More broadly, most fund managers now integrate ESG considerations in their investment processes to some extent, although not all will explicitly state their approach in their governing documentation." Finally, Fitch writes, "ESG MMFs primarily apply exclusionary investment approaches, based on varying criteria. Given differences in approach, the amount of exclusions may vary considerably between funds. The implementation of the Sustainable Finance Disclosure Regulation in Europe on 10 March 2021 will force funds to provide additional disclosure on their approach to sustainable investment, which may improve investors' ability to differentiate between funds. ESG considerations are typically a neutral factor in Fitch's rating analysis, provided the fund otherwise adheres to Fitch’s credit quality and liquidity criteria guidelines. However, in an extreme scenario, Fitch may elect not to rate an MMF where it believes the fund's ESG investment approach has negligible materiality, resulting in potential reputational or regulatory risk to the fund should investors or regulators conclude that the fund's ESG characteristics are over- or mis-stated." The Dashboard includes an appendix listing the ESG money market funds. The seven largest funds, which are all domiciled in France, include: Amundi Cash Institutions SRI (with E23.2 billion), BNP Paribas Mois ISR (E11.3B), Ostrum Sustainable Tresorerie (E10.9B), Ostrum ISR Cash Eonia (E10.5B), CPR Monetaire ISR (E8.3B), Ostrum Cash Euribor (E7.3B) and BFT Sequin ISR (E4.5B). The largest "short-term" funds include: BlackRock ICS Euro Liquid Environmentally Aware Fund (E4.2B); DWS Institutional ESG Euro Money Market Fund (E4.0B); Morgan Stanley Institutional Liquidity ESG Money Market Portfolio (E3.1BE); BlackRock ICS Sterling Liquid Environmentally Aware Fund (E2.9B); BlackRock ICS US Dollar Liquid Environmentally Aware Fund (E2.3B); BlackRock Wealth Liquid Environment Aware Fund (E2.1B); BlackRock Liquid Environmentally Aware Fund (E1.4B), and State Street ESG Liquid Reserves Fund (E757M).
