The size of the Australasian sustainable funds market shrank to approximately US$30 billion as of 30 June, marking a US$300 million decrease from the end of March, according to new data from Morningstar.
In the second quarter of 2024, Australia and New Zealand sustainable funds experienced outflows of nearly US$800 million, following modest inflows of US$27 million over the previous period. This was against positive inflows of US$6.6 billion injected into the broader Australasian fund universe over the quarter.
In January, Morningstar reported that Australasia saw inflows of some US$567 million in the last three months of 2023, driven by active strategies that gained US$434 million.
Conversely, active strategies were solely responsible for all outflows over Q2, while passively managed products attracted nearly US$5 billion of investor dollars.
Looking at asset classes, fixed income strategies continued to see net inflows over the quarter (US$230 million), compared with equity funds and allocation funds facing withdrawals of US$670 million and US$400 million, respectively.
Turning to fund launches, Morningstar revealed that Q2 saw the launch of four new sustainable funds, a lag on the previous period, bringing the total number of strategies in the region to 271 by the end of June.
“The Australian sustainable funds market remains quite concentrated, with the top 10 firms accounting for almost two-thirds of total assets in sustainable funds. This proportion has remained stable this year,” the research house said in its latest report.
Namely, Dimensional Fund Advisors (DFA) had the highest local market share, followed by Betashares and Vanguard.
Beyond Australasia
Regionally, the Asia-Pacific sustainable funds landscape presented a mixed flow picture.
While Asia (ex-Japan and ex-China) saw positive flows of US$2.5 billion, investors injected a notable US$2.7 billion into Taiwan.
Japan, however, continued to experience outflows, which slowed to US$1.3 billion from the restated US$1.7 billion in the first three months of the year.
For the global market, Morningstar said the sustainable fund universe showed signs of recovery in Q2, with net inflows of nearly US$4.3 billion. This contrasts sharply from the restated US$2.9 billion outflows seen in the prior period.
“The picture for global ESG fund flows is starting to improve. We started the year with outflows, but this has since turned around, with money trickling back into the sector,” said Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics.
“European ESG funds have gathered more than US$20 billion so far this year. Across the pond, investor appetite for ESG funds remains subdued, with continued outflows, but these were smaller than what we saw in the previous two quarters,” Bioy said.
Namely, Europe, the world’s leading market for sustainable funds, attracted US$11.8 billion in the second quarter, up from the restated US$8.4 billion in the previous three months.
The research house further reported that by the end of June, BlackRock continued to top the table in the global sustainable investing market, with over US$370 billion in assets across ESG-focused open-ended assets and ETFs.
This was in large part due to its passive offering, which has garnered more than US$300 billion in net assets.
Behind BlackRock, Europe's largest fund manager, Amundi, reached US$177 billion, almost level with the previous quarter.
