Asia-Pacific sees US$911m net flows into sustainable funds in Q1: Morningstar

SUSTAINABLE funds in Asia-Pacific, excluding China and Japan, saw US$911 million in net flows in the first quarter of 2022.

This was higher than the US$34 million in net inflows for Q4 2021, according to a Morningstar report dated May 3. The investment research company used fourth-quarter 2021 data as a proxy for a Q1 2022 estimation.

Taiwan was the top performer by far when it came to inflows, reaching US$842 million. This was followed by South Korea, which saw US$30 million of inflows.

Hong Kong saw the largest drop in sustainable fund flows, while markets such as India and Thailand experienced net outflows over the quarter.

Total sustainable fund assets in Asia excluding Japan held steady at US$71 billion in the first quarter of 2022. Taiwan and South Korea remained the 2 largest markets by asset size outside of China, which Morningstar does not have data for at the time of publication.

Equities represented 58 per cent of Asia ex-Japan ESG assets in the quarter, while allocation funds comprised 37 per cent. The fixed-income asset class represented the remaining 5 per cent.

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Passive ESG (environmental, social and corporate governance) funds accounted for 22 per cent of Asia ex-Japan sustainable fund assets in Q1 2022, up from the 20 per cent recorded in the year-ago period, Morningstar noted.

The first quarter saw 27 new sustainable fund launches in Asia ex-Japan – 12 from China, 8 in South Korea, 3 in Taiwan and 2 each in Malaysia and Hong Kong. New launches were dominated by equity and allocation funds.

Out of these 27 launches, 5 were passive funds – 4 exchange-traded funds and the Yingda CSI ESG 120 Strategy Index Fund. Climate-related launches continued to be popular in China with 5 new clean energy-themed strategies and 1 electric-vehicle-related launch.

Outside of China, the launch of the Taiwan-domiciled Cathay US ESG Fund was the largest, amassing over US$108 million in assets by the end of February 2022. The second-largest launch was that of Hong Kong-domiciled HSBC Global Sustainable Multi-Asset Income.

Globally, sustainable funds attracted US$96.6 billion of net new money in Q1 2022, down 35.7 per cent from the US$150.3 million of inflows recorded in the previous quarter.

Morningstar noted that this was the sharpest quarterly slowdown in sustainable fund net inflows over the past 3 years. The quarter on quarter decline also outpaced the 33 per cent decline experienced by sustainable funds in the first quarter of 2020 at the beginning of the coronavirus crisis.

That being said, inflows in sustainable funds held up better than those of the broader market. The overall global fund universe “nosedived” by 73 per cent in the first quarter to US$138 billion, from US$517 billion in Q4 2022.

Most regions saw a slump in sustainable fund inflows in Q1, except for Canada and Asia ex-Japan, which saw a rise in investors’ money by 31 per cent and 21 per cent, respectively.