Australian and New Zealand sustainable funds saw outflows of US$800 million in the second quarter of 2024, with active strategies accounting for the majority.
A quarterly global ESG fund flows report from Morningstar found US$800 million ($1.2 billion) compared to inflows of US$27 million in the first quarter.
This was driven almost entirely with outflows from active strategies as passive sustainable funds saw US$5 billion in net new money.
The outflows led to assets held in sustainable funds falling by US$300 million to US$30 billion as of 30 June 2024.
Breaking it down by asset class, fixed income sustainable funds saw positive flows of US$230 million but equity funds saw outflows of US$670 million.
There were four new sustainable funds launched during the quarter, fewer than in the previous quarter, which brings the total available in Australia to 271 strategies.
Looking at specific sustainable fund providers, Dimensional remained as the firm with the highest market share at 14.6 per cent. This was followed by Betashares Capital at 12.1 per cent, Vanguard Investments Australia at 7.6 per cent, and Mercer Investments Australia at 6.1 per cent.
| Firm | Market share (%) |
| Dimensional | 14.6 |
| Betashares Capital | 12.1 |
| Vanguard Investments Australia | 7.6 |
| Mercer Investments Australia | 6.1 |
| BlackRock Investment Mgmt (Au) | 5.1 |
| Australian Ethical Investment | 4.8 |
| Pendal Institutional | 4.4 |
| U Ethical | 3.2 |
| First Sentier Investors (Australia) | 2.8 |
| Russell Investment Management | 2.7 |
Source: Morningstar, 30 June
Global outlook
From a global perspective, sustainable open-ended and ETFs attracted US$34.3 billion in net new money, but the US, Canada, Australia and Japan all saw outflows. The largest outflows were seen in the US which lost US$4.7 billion during the quarter, following US$9 billion in outflows in the first quarter.
European funds saw US$11.8 billion in flows during the second quarter, up from US$8.4 billion in Q1, while Asia ex Japan saw inflows of US$0.7 billion.
Product development “continued on a downward trajectory” with 77 new launches in the quarter, which brings the six-month total to 170. This is significantly smaller than the 325 sustainable funds that had been launched at the same time in 2023.
“The organic growth rate of the global sustainable fund universe was 0.14 per cent in the second quarter, a slight improvement on the 0.01 per cent rate in the previous quarter. Yet, the aggregate growth of sustainable funds lagged that of the broader funds universe which, with US$200 billion of inflows, recorded an organic growth rate of 0.4 per cent.
“The cooldown [in fund launches] reflects a normalisation of the sustainable product development activity after three years of high growth, during which almost every asset management firm hastened to build their core sustainable fund ranges to meet the growing demand. Managers are now more selective and tactical in their approach to product launches.”
