Q1 2023 Sustainable Fund Flows
Morningstar today published its Global Sustainable Fund Flows report for Q1 2023 detailing regional flows, assets, and launches for the first quarter of 2023, which saw USD 29 billion of net new money, down from USD 38 billion in the previous quarter, however, global sustainable fund assets continued their recovery in the first quarter of 2023 to hit nearly USD 2.74 trillion at the end of March.
The exhibit below shows quarterly global sustainable fund flows for Europe, the United States, and the rest of the world since Q2 2020.
Exhibit 2 Quarterly Global Sustainable Fund Flows (USD Billion)
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• Global sustainable funds attracted USD 29 billion of net new money in the first quarter of 2023, down from nearly USD 38 billion in the previous quarter.
• Inflows were lower in most regions as macroeconomic pressures, including rising interest rates, inflation, and a looming recession, continued to weigh on investor sentiment. Sustainable funds in the United States experienced their third quarter of outflows in a year.
• Despite lower inflows but helped by higher valuations, global sustainable fund assets continued their recovery to hit USD 2.74 trillion at the end of March.
• Product development cooled down. Europe saw a significant reduction of new sustainable fund launches, amid regulatory uncertainty and fears of greenwashing accusations, while the rest of the world kept their momentum.
“The first quarter was a continuation of what we saw in 2022. ESG funds are not immune to the challenging macro environment, as reflected by their lower inflows compared with a few quarters ago. But ESG funds are still growing faster than the broader fund market, supported by increased ESG regulation at both company-and fund-level.
“In the United States, besides the challenging market environment, another factor that could have contributed to the third quarterly outflow in a year is the political backlash against sustainable investing. While it’s hard to measure its impact on investor demand for ESG products, it is equally hard to ignore it.” – Hortense Bioy, global director of sustainability, Morningstar
If you would like to speak to Hortense Bioy about her findings, please let me know.
Source: Morningstar Direct, Manager Research