ESG fund launches fall in Q1 2023

New ESG fund launches fell in Q1 of 2023 amid regulatory uncertainty and greenwashing concerns, Morningstar report.

Q1 2023 saw the launch of 113 new sustainable funds globally, the lowest figure since at least the start of 2020, Morningstar say. New launches had previously exceeded 200 in every quarter since mid-2020.

“The decline in new products can be partly attributed to the overall market sentiment damped by the challenging macro backdrop but also to greenwashing accusations and the ever-evolving regulatory environment,” Morningstar said.

In contrast to Europe, Morningstar said that the number of fund launches in the United States and the rest of the world was comparable to previous quarters.

Globally, investors added a net $29 billion of new money in the first quarter to sustainable funds, down from $38 billion in the fourth quarter of 2022. European funds benefited from net inflows during the quarter while clients pulled cash from US funds amid an ESG pushback from some Republican politicians.

Still, with market valuations rising in 2023 as stock markets recovered, global sustainable fund flows reached $2.74 trillion at end-March, against an all time-high of near-$3 trillion in late 2021.