Sustainable fund inflows reach record high, but Asian firms register slowdown

Asia ex-Japan and China lost $22m of funding in Q4.

Sustainable funds attracted $37b of new net money in the fourth quarter alone of 2022, 50% higher than in the third quarter and 22% higher than in the second quarter, according to data released by Morningstar.

However, firms based in Asia did not enjoy much of this growth. Asia excluding Japan only clinched $1.5b of the funds.

Asia excluding Japan and China recorded net outflows of roughly $22m combined over the fourth quarter. Hong Kong reported the biggest increase in outflows, at $314m; followed by South Korea, whose net outflows reached $349m in the fourth quarter, driven by bond funds.

India and Malaysia also registered outflows of $38m and $8m, respectively.

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In contrast, Thailand reported $11m in inflows. Taiwan continued to lead the region with $546 in net inflows. Singapore followed, with $110m reported net inflows to its sustainable funds.

By asset size, Taiwan and South Korea remained the two largest markets by asset size, accounting for 15.9% and 7.5% of the region’s sustainable fund assets, respectively. Despite the large amount of outflows reported in its latest reporting quarter, South Korea’s sustainabel fund assets actually rebounded during the period after falling in the previous two quarters, rising by 5.7% in Q3 2022. South Korea equity funds were a major contributor to the increase in assets, Morningstar said.

Australia and New Zealand combined took $1.6b inflows—quadruple the approximately US$400m in fund inflows it recorded in the third quarter.

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Looking at flows at individual region and country levels, only three regions recorded a rebound in net new money into sustainable funds: Europe, Australia, and Canada. The rest of the world experienced outflows, according to Morningstar.

Europe alone registered an 88% increase in inflows after three quarters of decline, with investors pouring in $40b into sustainable products in Q4.