ESG funds in Asia ex-Japan record US$660m in outflows in Q3, says Morningstar
ENVIRONMENTAL, social and governance (ESG) funds in Asia (ex-Japan) recorded outflows of about US$660 million in the third quarter of 2022, financial services company Morningstar has announced.
This figure, however, used second-quarter data from China as a proxy for its third-quarter data, given that the most recent figures were unavailable when this report was published.
Excluding China, the region actually experienced net inflows of nearly US$600 million. However, it was still lower than the US$1.3 billion of net inflows in the previous quarter, said Morningstar in its Q3 2022 review on global sustainable fund flows.
While capital is moving out of ESG funds in Asia ex-Japan, sustainable funds across the globe attracted US$22.5 billion of net new money. This was lower than the revised inflows of US$33.9 billion in the second quarter. Nonetheless, flows into sustainable funds held up better than the overall market.
Global funds suffered an outflow of US$198 billion in Q3, extending from the US$278 billion worth of outflows in the previous quarter.
Morningstar said in the report released on Thursday (Oct 27): “Macroeconomic headwinds, including enduring inflationary pressures, rising interest rates, disruption to global energy supply, and a looming global recession have become more acute in the course of the third quarter, spelling trouble for global fund markets.”
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Japan, considered on its own, also experienced fund outflows of US$493 million.
United States registered a small net inflow of US$459 million, recovering from the US$1.6 billion outflows in the previous quarter.
Europe, the biggest market for sustainable funds, saw fund inflows of US$22.6 billion, its lowest level since the start of the Covid-19 pandemic in Q1 2020. Net inflows in the previous quarter came in at US$33.4 billion.
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Among Asia ex-Japan markets, Taiwan continued to attract positive flows into ESG funds to the tune of US$856 million, though it was still lower than in the previous quarter. Singapore recorded negligible inflows of US$0.72 million.
Thailand was among the rare few that welcomed higher inflows at US$5 million in Q3, compared to US$0.83 million in Q2.
Among markets that recorded outflows, South Korea experienced the most – at US$177 million.
India experienced net outflows of US$59 million from its ESG funds; Hong Kong recorded US$24 million in outbound funds.
The Morningstar report also noted that the asset sizes of ESG funds declined, but overall, such funds still outperformed the global fund market overall.
The asset sizes of global sustainable funds slipped 1.6 per cent to US$2.2 trillion as of Sep 2022, from the restated US$2.23 trillion at the end of the second quarter. This decline was the third consecutive drop since the first quarter of 2020.
Nevertheless, the asset sizes of sustainable funds held up better than that in the overall global fund market, which shrank by 7.5 per cent in Q3.
The value of assets in Asia-ex Japan rose 0.8 per cent to US$49 billion at the end of September, compared with three months before.
Excluding China, Taiwan accounted for 14.6 per cent of the region’s assets, and South Korea made up 6.9 per cent, making them the two largest markets by asset size in the region.
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