Excluding China, Asia ex-Japan recorded net inflows of roughly $622m in the first quarter of 2024, down from $1.7bn registered in the fourth quarter of 2023, according to report by Morningstar.
However, China-domiciled sustainable funds experienced their third consecutive quarter of outflows, totalling $367m. As in the previous quarter, the withdrawals were dominated mostly by actively managed funds, including ABC-CA New Energy Theme Mix and China AMC Energy Innovation Equity, which lost $48m and $33m, respectively, over the quarter.
Hong Kong-domiciled sustainable funds saw $472m in net outflows over the quarter, the largest among single markets. Much of the flows were driven by Sun Life AM Hong Kong ESG Index’s $447m in redemptions over the period, a sharp difference to the $420m of inflows it attracted over the preceding three quarters.
India-domiciled sustainable fund flows also extended their streak of net outflows, and Singapore-domiciled sustainable fund assets fell 3.8% quarter over quarter.
In contrast Taiwan continued to be by far the largest market in the region with 24% of assets in sustainable funds. An influx of over $1.2bn into Taiwan-domiciled sustainable funds during the first quarter pushed the region’s total to net positive.
The now second-largest passive fund in Taiwan, Capital ICE ESG 20+ Year BBB US Corporate ETF, enjoyed $1.3bn in subscriptions alone, continuing its momentum since its November 2023 launch.
Product launches stall
However, across the region, product development continued its downward trajectory, with only eight out of the 97 new sustainable fund launches in the first three months of the year launched in Asia ex-Japan, the lowest amount since the fourth-quarter 2019.
Equity funds remained the largest asset class in the region at 67% of Asia ex-Japan sustainable fund assets at the end of March, while allocation and fixed-income funds accounted for 22% and 11%, respectively.
Passive funds continued to attract investor interest and further narrow the gap between active sustainable funds, with inflows of $1.8bn in the first quarter 2024, pushing their representation to 48% of assets as of the end of March 2024 from 40% in the first quarter of 2023.
Mixed global trends
Among other regions, the United States experienced its worst-ever quarter with record redemptions of $8.8bn, and Japanese sustainable funds recorded outflows of $1.7bn.
The outlier was Europe, where sustainable funds registered almost $11bn of inflows, more than double the subscriptions of the previous quarter. These inflows had a significant impact on the global picture.
Indeed, “boosted mostly by the asset growth among European passive strategies, global sustainable fund assets inched by 1.8% to just under $3trn at the end of the first quarter from $2.9trn,” said Hortense Bioy, global director, sustainability research at Morningstar.
Compared with the previous quarter where global sustainable funds experienced net quarterly outflows for the first time on record, the global universe of sustainable open-end and exchange-traded funds rebounded slightly by attracting nearly $900m of net new money in the first three months of 2024.
