Asia-Pacific attracts US$929m net flows into sustainable funds in Q2: Morningstar
Vivienne Tay
SUSTAINABLE funds in the Asia-Pacific, excluding China and Japan, recorded US$929 million in net flows in the second quarter of 2022, down 26 per cent from the S$1.3 billion net inflows recorded in the first quarter, Morningstar said on Friday (Jul 29).
Taiwan continued to attract the highest sustainable fund flows in the region, reaching US$911 million in the period. Hong Kong had US$129 million in inflows, while flows into Thailand increased to US$800,000.
In contrast, South Korea, India and Indonesia had net outflows in Q2. South Korea recorded US$123 million in net outflows, with fixed-income funds chalking up the largest outflows including the Woori High Plus Short-Term Feeder Superior ESG Bond, KIM Credit Focus Feeder ESG Bond and KIM e Short-Term ESG Bond.
Morningstar noted that some equity funds, such as the Tiger Innovator ESG30 ETF and Midas SRI Equity, continued to experience net inflows.
Total sustainable fund assets in Asia excluding Japan slid 1.3 per cent quarter on quarter to US$61 million in the second quarter.
Outside China, where Morningstar did not have data on at the time of publication, Taiwan and South Korea remained the top 2 largest markets by asset size. They respectively accounted for 10.8 per cent and 6.3 per cent of the region’s assets.
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Notably, South Korea’s total assets declined 18.7 per cent quarter on quarter, and was 32.1 per cent lower than its peak of US$5.6 billion in Q2 2021.
Equities continued to comprise the bulk of Asia ex-Japan environmental, social and corporate governance (ESG) assets in Q2 at 60.9 per cent, followed by allocation funds (34.4 per cent) and fixed income assets (4.7 per cent). Passive ESG funds accounted for 26.6 per cent of the assets in Q2, up from 25.2 per cent in Q1 2022.
Sixteen new sustainable funds were launched in Asia ex-Japan in second quarter — 11 in China, 2 each in Malaysia and Taiwan and 1 in Thailand. Similar to the first quarter, allocation and equity funds dominated new launches, comprising 10 and 6 launches each.
Of the new launches, only 2 were passive funds. Climate-related fund launches continued to gain ground in China, with 4 new clean energy-themed active strategies and 2 low-carbon themed launches.
Global sustainable funds attracted US$32.6 billion in net new money in Q2 2022. This was 62 per cent lower than the revised US$87 billion inflows recorded in the first quarter.
The US, for example, saw its first quarter of outflows in more than 5 years, as US-domiciled sustainable funds bled US$1.6 billion. Net inflows in Europe, the biggest market for sustainable funds, tumbled 57 per cent.
That said, flows in sustainable funds held up better than funds in the broader market, which had outflows of US$280 billion in Q2.
“Macroeconomic headwinds, including inflationary pressures, rising interest rates, a global energy crisis, and a looming global recession became more acute in the second quarter, spelling trouble for global fund markets,” Morningstar said.
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