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Laxman Pai, Opalesque Asia:

Environmental, social, and governance (ESG) investments saw a strong performance and an influx of flows in 2020 and are expected to be a key driver of organic asset growth for money managers in 2021 said a study.

"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," the Moody's Investors Service said in its new report.

According to the New York-based ratings agency's report, inflows into environmental, social, and governance strategies grew 140% in 2020 from the year before. Since 1995, ESG assets have routinely grown at a compound annual growth rate of 14%, although the growth has picked up rapidly since 2012.

ESG-themed investments saw $80.5 billion in global net inflows in the third quarter, up 14% from the previous quarter. Sustainable fund AUM reached a record high of $1.23 trillion as of Sept. 30, revealed the report "Funds & Asset Management - US: ESG investment outperformance overcomes investor hesitancy, a key barrier to growth".

"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......................

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