Global sustainable funds attracted USD32.6 billion of net new money in the second quarter of 2022, representing a fall of 62% relative to the revised USD 87 billion of inflows in the first quarter, according to Morningstar’s Global Sustainable Fund Flows report for Q2 2022.
Hortense Bioy, Global Director of Sustainability Research, remarked: “Amid investor concerns over a global recession, inflationary pressures, rising interest rates, and the conflict in Ukraine, sustainable funds net inflows plummeted in the second quarter, fared better than the broader market.
- Asia ex-Japan ex-China: Net inflows of USD 929 million into sustainable funds were recorded during the second quarter of 2022. This is lower than the USD 1,271 million in net inflows in first-quarter 2022. Sustainable fund flows in Taiwan continued to be the highest in the region, reaching USD 911 million over the second quarter. It was followed by Hong Kong’s USD 129 million of inflows. By contrast, South Korea, India, and Indonesia experienced net outflows over the quarter.
- China saw USD 1,398 million of net outflows in the second quarter, versus net inflows of USD 208 million a quarter earlier. Environmental sector funds saw large outflows of USD 1,055 million, which might be due to market turbulence as well as investors realizing profits as the market bounced back in May and June.
Commenting on the series of new carbon-neutrality ETFs recently launched in China, Jackie Choy, Morningstar’s Director of ETF, Asia, remarked: “ETFs have been a popular channel for asset managers to put forth the ESG/thematic ideas to reach investors in China, and the popularity of funds of specific themes has been influenced by the Chinese government’s commitment to pursue economic transformation. Given this backdrop, we wouldn’t be surprised to see more ESG/Thematic ETF launches that ride on any latest economic development or regulations.”
Sustainable Fund Inflows Plummet but Once Again Hold Up Better Than Their Conventional Peers
The global universe of sustainable funds attracted USD 32.6 billion of net new money in the second quarter of 2022, representing a fall of 62% relative to the revised USD 87 billion of inflows in the first quarter. The organic growth rate of this universe contracted, too. Calculated as net flows relative to total assets at the start of a period, the global sustainable funds’ organic growth rate declined to 1.3% in the second quarter from roughly 3% in the first quarter. Nonetheless, flows in sustainable funds held up better than those in the broader market. In comparison, the overall global fund universe suffered
outflows of USD 280 billion in the second quarter of 2022, after registering net inflows of USD 141 billion in the first quarter.
Macroeconomic headwinds, including inflationary pressures, rising interest rates, a global energy crisis, and a looming global recession became more acute in the second quarter, spelling trouble for global fund markets.
