Global Sustainable Fund Report
Global research institute Morningstar releases its third quarter global sustainable fund report, which aims to measure the market performance and scale changes of sustainable funds in various regions.
The funds involved in global sustainable fund report include open-end funds and exchange-traded funds (ETFs). The definition of sustainability comes from the fund’s prospectus and other issuance documents, and ESG funds are included in the scope of sustainable funds.
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Development of Global Sustainable Fund
Net inflows into global sustainable funds in the third quarter were US$13.7 billion, half of the second quarter (US$23.6 billion). This phenomenon has been linked to poor performance in the stock and bond markets, as well as the continued impact of high inflation, high interest rates, and recession fears. Europe had the largest net inflows into sustainable funds, reaching $15.3 billion, but this was still down from $25.4 billion in the second quarter. The Americas region had the largest net outflows from sustainable funds, reaching $2.7 billion, up from $576 million in the second quarter.
Total assets of global sustainable funds in the third quarter were US$2.74 trillion, a decrease of 4.2% from the second quarter (US$2.86 trillion). Sustainable funds in Europe have the largest assets, accounting for 85%. A total of 102 sustainable funds were launched globally in the third quarter, down from 154 in the second quarter.
Development of European Sustainable Fund
Net inflows into European sustainable funds in the third quarter were US$15.3 billion, about half of the second quarter. The decline in inflows was mainly due to a decrease in subscriptions from actively managed funds. The European Central Bank is likely to continue to maintain high interest rates for some time to come, putting pressure on the stock and bond markets.
In the sustainable fund space, equity funds attracted $15 billion in inflows and bond funds attracted $6.8 billion. Sustainable fund outflows totaled $5 billion in the third quarter, up from $1.4 billion in the second quarter.
In terms of asset size, the total assets of sustainable funds in Europe dropped from US$2.39 trillion to US$2.29 trillion, accounting for 21% of all funds in Europe. Among newly launched funds, climate themes are the most popular, accounting for more than one-third. Climate-themed investments are related to the climate neutrality goals set by the EU and focus on areas such as clean energy, sustainable transportation, green buildings and circular economy.
Development of American Sustainable Fund
In the third quarter, sustainable funds in the Americas experienced a net outflow of US$2.7 billion. This is also the fifth consecutive quarter of net fund outflows since 2022. A total of US$14.2 billion was withdrawn from sustainable funds in the Americas over the past year. Half of these outflows come from actively managed funds and half from ETFs. Sustainable bond funds were the only asset class to see net inflows during the quarter, with cumulative inflows of $690 million, likely due to higher bond yields.
Total sustainable fund assets in the Americas region were $298.8 billion, down nearly 17% from the highest point. Only three sustainable funds were launched this quarter, compared with 27 in the previous quarter. 13 sustainable funds were closed and 4 funds no longer used sustainable strategies. This is related to the regulations introduced by the SEC in September, and only allow 80% of assets to be invested in sustainable assets to use this designation.
Development of Asian Sustainable Fund
In the third quarter, sustainable funds in Asia had a net inflow of US$1.98 billion. Two new energy ETFs in China attracted a net inflow of US$660 million. Overall, sustainable ETF funds in Asia have inflows of US$2.5 billion, while actively managed sustainable funds have outflows of US$520 million.
The total assets of sustainable funds in Asia remained basically unchanged in the third quarter, at approximately US$6.7 billion. Among them, stock funds account for 70% of the total assets, hybrid funds and bond funds account for 26% and 4.5% respectively. A total of 20 sustainable funds were launched this quarter, including only one bond fund.