Sustainable fund flows attracted $37 billion of net new money in Q4 2022, says Morningstar.

Morningstar’s Global Sustainable Fund Flows report for Q4 2022 shows quarterly global sustainable fund flows for Europe, the United States, and the rest of the world since Q1 2020. The report found:

• Global sustainable fund inflows in Q4 2022 were 50% higher than the revised $24.5 billion in Q3 and $7 billion higher than those in Q2.

• The rebound in net new money into sustainable funds was felt only in Europe, Australia, and Canada, while the rest of the world experienced outflows.

• Europe continued to capture most of the inflows and make up the lion’s share of the sustainable fund landscape with 83% of global sustainable fund assets.

• The U.S., the world’s second largest sustainable fund market, shed nearly $6.2 billion in Q4 2022, after a $10.4 billion intake in Q1, a $1.6 billion outflow in Q2, and a modest $459 million inflow in Q3.

• Global sustainable fund assets recovered in Q4 2022 and reached nearly $2.5 trillion at the end of December, from the restated $2.24 trillion three months earlier. This 11.6% increase put an end to three quarters of asset decline. In comparison, the overall global fund market grew by 6% in the three months through December 2022.

• 11 of the 17 sustainable funds launched in the U.S. during Q4 2022 are actively managed. The new offerings brought the total number of sustainable open-end and exchange-traded funds in the U.S. to 598 at the end of the quarter.

Hortense Bioy, global director of sustainability research says, “The final quarter of 2022 reveals a divided picture. The rebound in global inflows into sustainable funds was driven by Europe where investor appetite remains strong and supported by a favorable regulatory environment. The US ESG fund market, however, faced headwinds: macroeconomic of course, but also political, with prominent politicians speaking and acting against ESG investing.”