U.S. investors pulled a record $8.8 billion from sustainable funds in Q1

U.S. investors soured on sustainability in the first quarter of 2024, with a record $8.8 billion being pulled from funds that focus on impact, a new report from Morningstar shows.

Despite the drag from the United States numbers, sustainable funds globally attracted nearly $900 million in new money in January, February and March. That represented a rebound from the end of 2023, when $88 million was withdrawn from those funds, Morningstar found.

The fund tracker defines the global sustainable fund universe as open-end funds and exchange-traded funds that, by prospectus or other regulatory filings, claim to focus on sustainability, impact or environmental, social and governance factors.

Worldwide, just short of $3 trillion was invested in those funds at the end of the quarter, with the vast bulk of that figure, $2.5 trillion, represented by Europe. U.S. investors own $335 billion in such assets, Morningstar’s data show.

“Boosted mostly by the asset growth among European passive strategies, global sustainable fund assets inched up by 1.8% at the end of the first quarter,” the report said. That gain came “against a mixed macroeconomic backdrop, including the uncertain inflation and interest rates prospects, the artificial intelligence boom, as well as continued geopolitical risks.”

Less interest in sustainable funds resulted in a record low debut of new funds focused on impact and ESG. Morningstar said only 97 such funds were added in the first quarter, down from 176 in the fourth quarter of 2023. And the reduction in sustainable fund launches wasn’t limited to the U.S.: The trend was seen across the globe, the report found.

U.S. asset manager BlackRock remains the dominant force in sustainable funds, with $368 billion under management. Amundi and UBS, the two largest European firms in the space, have $177 billion and $171 billion, respectively, under management.

Here are the top 10 U.S. sustainable funds bringing in the most investor money in Q1:

Other highlights from the report:

• European sustainable funds registered almost $11 billion of inflows, more than double the subscriptions of the previous quarter.
• Japanese sustainable funds recorded outflows of $1.7 billion.
• Canada collected $188 million in the first quarter of 2024. Other markets marginally helping the recovery of sustainable fund flows globally were Asia ex-Japan, which garnered $243 million, while Australia and New Zealand registered $26 million of combined inflows.

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