The flow of funds into sustainable investment avenues across Asia, excluding Japan and China, witnessed a significant downturn in the first quarter of the year, marking a notable 63 percent drop from the revised $1.7 billion in net inflows recorded in the previous quarter.
According to Morningstar’s Global Sustainable Fund Flows report, sustainable open-ended and exchange-traded funds in the Asia ex-Japan, ex-China region accumulated $622 million in net inflows during the three months ending March.
Despite the diminished inflows, Asian investors contributed marginally to the recovery of the global sustainable funds universe, which garnered nearly $900 million in total net flows. This follows a period of unprecedented quarterly net outflows amounting to a revised $88 million in the final quarter of 2023.
The total assets under sustainable fund management in Asia ex-Japan experienced a modest 1.6 percent uptick compared to the previous quarter, reaching $63 billion, mirroring the figure reported during the corresponding period last year.
Asia ex-Japan maintains a marginal 2 percent share of the global sustainable fund sector, which has ballooned to nearly $3 trillion as of March’s end, as per the latest findings.
While most countries in the Asia region observed minor outflows between January and March, Taiwan emerged as a standout market. Locally domiciled sustainable funds attracted more than $1.2 billion in net inflows, propelling the region’s total to a net positive.
The report highlights Taiwan as the leading market in the Asia ex-Japan, ex-China region, with sustainable funds commanding 24 percent of total assets.
In contrast, sustainable funds domiciled in Hong Kong experienced a substantial decline, with outflows amounting to $472 million during the quarter, marking the steepest drop among the individual markets scrutinized in Morningstar’s analysis.
Singapore’s environmental, social, and governance (ESG) funds witnessed net outflows of $29.5 million, with assets declining by 3.8 percent quarter-over-quarter to $693 million.
Japanese sustainable funds endured net outflows of $1.7 billion between January and March, marking the eighth consecutive quarter of outflows for the market. This contrasts with the broader Japanese funds landscape, which saw inflows of $35 billion in the first quarter, as per Morningstar.
Australia and New Zealand exhibited a slight recovery from net outflows in the previous quarter, attracting $27 million in net new investments during the first quarter of this year.
Across Asia ex-Japan, investors continued to favor passive strategies, with these funds amassing approximately $1.8 billion in net inflows over the quarter. They now constitute 48 percent of the region’s sustainable fund assets, reflecting a 40 percent increase from the corresponding period last year.
In Australia, passive strategies garnered $92 million in net inflows during the first quarter, while active sustainable funds experienced net outflows of $65 million, according to the report.
