Socially conscious investors favored bond funds more than stocks for the first time, new Morningstar data shows. Fixed-income funds deemed environment, social and corporate governance-focused by Morningstar last year saw greater net inflows than their equity counterparts for the fist time, according to a report released last week. Morningstar refers to these ESG-conscious funds as “sustainable.” Sustainable bond funds amounted to three-fourths of overall net flows within sustainable funds, up from 16% in 2021. That jump helped fixed income funds overtake equity-focused peers in holding the lion’s share of net inflows last year. These sustainable fixed income funds also had more money come in than their their non-sustainable peers. Sustainable bond funds posted a $2.4 billion net annual inflow, compared with a loss of $335 billion seen among non-sustainable taxable- and municipal-bond funds. To be sure, inflows across sustainable funds dropped sharply in 2022. The $3.1 billion net inflow seen by funds in 2022 was around one-fifteenth of the $47 billion seen on average over the last three years. The market downturn also hindered the performance of sustainable funds more than non-sustainable ones. The average sustainable fund down nearly 19% in 2022, which is about 1 percentage point greater than the average loss seen among funds deemed not sustainable. Still, the top fixed sustainable income funds held up better than the broader stock market last year. Every fund on Morningstar’s list of the top 10 fixed income funds by net flows provided a better return than the S & P 500 did last year. Here’s the list: The iShares ESG Aware US Aggregate Bond ETF (EAGG) led the pack with $789 million in net inflows. It tracks U.S. dollar-dominated investment grade bonds, with the goal of finding debt with the same risk and return characteristics of the broader bond market — while having a commitment to ESG. The ETF outperformed the S & P 500 in 2022, losing 15.3% compared with the broad index’s 19.4% drop. However, the fund is down 0.5% this year, while the S & P 500 has gained 3%. Despite posting outflows in the second half of the year, the Invesco Floating Rate ESG fund (AFRAX) still came in with the second highest inflows for the year. The fund has been considered ESG-conscious for less than three years, according to Morningstar, but has been able to gain traction among investors. The fund invests at least 80% of its net assets, on top of any borrowings, in senior secured floating rate loans from banks and other financial institutions. That helped pare it keep its losses at just 8.8%, compared with the S & P 500 dip of more than 19%. The fund has slightly underperformed the S & P 500 so far this year, gaining just 1.5%. Two Calvert funds, the Calvert Bond (CSIBX) and Calvert Core Bond (CLDAX), also made the list, with $413 million and $177 in net inflows, respectively. Both funds are up modestly this year but not as much as the S & P 500. Still, the both posted a smaller drop than the index last year. The Hartford Schroders Sustainable Core Bond fund (SCBRX) was the newest member of the top 10 fixed income funds by inflows, posting $109 million in net inflows for the year. Each potential holding is vetted by the fund before being added, but the firm generally avoids holdings related to themes such as thermal coal generation, tobacco production and controversial weapon manufacturing. Like others in the top 10, the fund was able to outperform the S & P 500 last year, slipping 16.8%.