As the global investment community grapples with a fluctuating market and evolving attitudes towards ESG (Environmental, Social, and Governance) funds, a nuanced story is emerging from Europe. This narrative, against the backdrop of Amundi’s «Responsible Investment Views 2024» report and innovative steps by Mirova and Robeco, is further illuminated by Morningstar’s latest findings on global sustainable fund flows.
Morningstar reports a significant shift: for the first time, global sustainable funds experienced net outflows in the fourth quarter of 2023, with investors withdrawing 2.5 billion dollars. This marks a stark contrast to the continuous inflows these funds have seen in recent years. Amidst a challenging macroeconomic and geopolitical landscape, global sustainable funds still managed to gather 63 billion dollars over 2023. However, it’s in Europe where the story takes a different turn.
European sustainable funds showcased a notable resilience, garnering 3.3 billion dollars of net new money in the same quarter, buoyed largely by passive funds, which collected 21.3 billion dollars. Despite actively managed sustainable funds facing close to 18 billion dollars in redemptions, the overall picture for Europe is one of relative strength, especially when compared to the broader market and the stark withdrawals seen in the U.S., where sustainable funds saw a record outflow of 5 billion dollars in the last quarter.
European steadfastness
This European steadfastness in sustainable finance aligns well with the initiatives by Amundi, Mirova, and Robeco. These entities are not only contributing to the maturation of sustainable finance but are also addressing the critical need for transparency and tangible impact measurement in investments — a factor that could be influencing the European market’s relative stability.
Amundi’s report, highlighting the need for responsible investment to evolve from optimism to accountability, finds echo in Europe’s steady commitment to sustainable funds. Similarly, the Mirova and Robeco initiative, which aims to establish a global standard for calculating emissions saved by green solutions, reflects a deepening commitment to verifiable, impactful sustainable investment strategies.
Morningstar’s analysis, particularly the comments by Hortense Bioy, global director of sustainability research, underscores a crucial point: the resilience of passive funds and the underperformance of active managers in preventing redemptions in a market segment ripe for demonstrating value. This dichotomy highlights the growing importance of not just investing sustainably, but doing so in a way that is both strategic and effective.
Resilience and adaptation
The tale of sustainable finance in Europe, as it stands, is one of resilience and adaptation. While the global market experiences a retraction in ESG fund flows, Europe’s continued commitment to and innovation in this sector point towards a deepening maturity. This maturity is not just about weathering market fluctuations but about building a sustainable finance ecosystem that is robust, transparent, and impactful.
In this context, the role of professional investors becomes ever more critical. The task at hand is not just to navigate these shifting sands but to actively contribute to and shape a sustainable finance landscape that is resilient, responsible, and responsive to the changing dynamics of the global market. Europe’s steadfast approach, coupled with innovative measures from key players like Amundi, Mirova, and Robeco, offers a blueprint for navigating these turbulent times in sustainable investing.
Raymond Frenken is managing editor international at Investment Officer. As a journalist he has followed international financial markets and EU financial regulation for more than three decades.
Further reading on Investment Officer:
- Solid global inflow track record for ESG is broken
- Sustainable investing: ‘Stay the course!’ says Amundi
- Industry group working on emissions avoided database