Asia ex-Japan ESG funds buck global gloom, with bright spots in Taiwan, Thailand

SUSTAINABLE funds in Asia, excluding Japan and China, attracted US$1.4 billion in net inflows over the fourth quarter of 2023, financial data provider Morningstar said in a Jan 25 report.

The optimism in this region stands in contrast to investor scepticism elsewhere over funds that pursue environmental, social and governance (ESG) strategies. US fund clients withdrew a net US$5.1 billion in Q4 2023, while Japan saw US$1.2 billion in outflows. Q4 data for China was unavailable.

Within the Asia ex-Japan region, Q4’s highest fund inflows came from Taiwan-domiciled funds. The Cathay Sustainability High Dividend ETF – the largest passive fund in the region with US$7.6 billion in assets – recorded subscriptions of US$580 million. Another three Taiwan-domiciled fund launches accounted for US$725 million in inflows.

Sustainable fund assets in Taiwan grew by nearly 50 per cent over the year to reach US$13.6 billion at the end of 2023. The “great performance” of the local market provided a boost, said Morningstar, noting that the MSCI Taiwan Index returned 17.5 per cent in the quarter.

Another bright spot is Thailand. Assets in Thailand-domiciled sustainable funds increased from US$75 million in end-August 2023 to US$236 million in end-December, thanks to new fund launches.

Q4 saw 29 new sustainable funds launched in the Asia ex-Japan region, the largest number since Q3 2022. Of these launches, 22 were Thailand-domiciled products that received the support of the country’s Securities and Exchange Commission (SEC).

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“With these launches, the SEC is targeting Thailand’s younger generation and has included tax incentives subject to a holding period for investing in the funds,” Morningstar noted.

Besides Thailand and Taiwan, there were also two new sustainable funds launched in China in Q4, and one each in Singapore and South Korea.

That said, some regional markets saw bearishness over ESG funds. Malaysia-domiciled sustainable funds suffered US$20 million in net outflows over Q4. Indian ones recorded US$44 million in net outflows, ending 2023 with four consecutive quarters of outflows totalling US$226 million.