ESG and sustainable funds saw redemptions of around $2.5 bn in Q4 2023, the first quarter of negative outflows.
The new research from Morningstar finds that:
• Global sustainable funds experienced net outflows for the first time in the fourth quarter of 2023. Investors withdrew USD 2.5 billion against a continuously challenging macroeconomic and geopolitical backdrop.
• In Europe, sustainable funds held up better than the broader market and garnered USD 3.3 billion of net new money in the fourth quarter, thanks to passive funds, which collected USD 21.3 billion. Actively managed sustainable funds, however, lost close to USD 18 billion.
• Over the full year, European sustainable funds garnered USD 76 billion. By comparison, European conventional funds suffered annual outflows of USD 50 billion.
• Investors pulled a record USD 5 billion from US sustainable funds in the last quarter, for a total of USD 13 billion over 2023.
• More than 120 new sustainable funds were issued in the fourth quarter.
Hortense Bioy, global director of sustainability research, Morningstar, says, “The global ESG fund flow picture in the last quarter may look bleak, but ESG funds in Europe –by far the largest market– continued to hold up better than the rest of the fund universe. Global ESG fund assets kept rising too. The disappointing reality is that active managers failed again to prevent redemptions in a corner of the market where it’s easier for them to prove their worth. By contrast, passive funds demonstrated consistent resilience.”