LONDON (Reuters) - British asset manager M&G has launched a sustainable version of its flagship 56 billion pounds ($77 billion) PruFund range of funds, its chief executive told Reuters. The move by M&G, carved out from insurer Prudential in 2019 and managing around 370 billion pounds in assets, is part of a shift to focus on investments that don’t harm the environment amid surging demand from investors. Assets in funds with a sustainability focus reached almost $2 trillion in the first quarter, data from industry tracker Morningstar showed. Companies are rushing to adopt sustainability strategies, partly in response to investor pressure, but activists say their claims need to be scrutinised to ensure they are genuine. M&G said the new multi-asset fund range, called PruFund Planet, was launched with 500 million pounds of investment from the company’s 143 billion pound Prudential With-Profits Fund. The existing PruFund range of funds, a favourite of retirees across Britain, currently manages around 56 billion pounds on behalf of 455,000 customers and invests in markets from stocks to bonds and real estate. Each PruFund uses a smoothing mechanism to avoid extreme short-term stock market volatility. This means the funds do not experience the full highs - or extreme lows - of the markets. Many with-profits funds have closed in recent years as the sector has faced regulatory reform and investors became more enthusiastic about riding a wave in equity markets. Assets in UK with-profit funds dropped below 300 billion pounds in 2017 from around 400 billion in 2005, according to the Financial Conduct Authority. PruFund and PruFund Planet are the only parts of the Prudential With-Profits Fund still open to new clients, although the former saw a steep fall in net inflows to 400 million pounds in 2020 from 6.4 billion in 2019, as the pandemic cut face-to-face meetings with financial advisers. M&G said PruFund Planet was the first time a with-profits fund had given customers the chance to invest in a sustainability-focused way. CEO John Foley said the existing PruFund range was transitioning to a sustainable strategy but was still invested in sectors such as coal. “Clients and customers genuinely want us to pivot towards sustainability,” he said. “PruFund is moving in that direction but will take some years to get to a fully sustainable perspective.” Foley said research among financial advisers showed half their clients wanted a sustainable alternative to conventional pension and savings products. ($1 = 0.7272 pounds) Reporting by Simon Jessop; Editing by Mark Potter Our Standards: The Thomson Reuters Trust Principles.