In its landscape report for the first half of 2024, the ETF provider said demand for ESG products was at its lowest level in a decade.
He says: “Despite the undeniable importance of ESG factors in business practices and personal consumption, investor money does not strike the same note. ESG and sustainable investing have taken a back seat and have recently seen a slowdown.
“With ESG momentum waning, some might wonder if this is just a passing trend that peaked during the COVID-19 pandemic. Given the cyclical nature of trends, it appears that ESG has passed the baton on the next hot topic of artificial intelligence.
There is also a year-long wait for a sustainable ETF to launch this year – the Russell Investments Sustainable Global Opportunities Complex ETF, which launched in April. This is the company’s first global equity ETF in Australia.
The product launch brought the total number of listed sustainable funds to 45, which held a total of $111 billion, or 5.6% of funds under management in the June 2024 quarter.
Research from Adviser Ratings has found Australians are aiming to protect their wealth rather than focusing on responsible investing. A survey of 2,100 Australians found that only 38% consider ESG factors in their investing.
“This figure is indicative of a broader shift in sentiment among consumers who are increasingly prioritizing immediate financial stability and long-term wealth protection over ESG considerations in a cost of care crisis. life,” Adviser Ratings said.
In July, a quarterly Morningstar report on global ESG fund flows found that US$800 million ($1.2 billion) had been lost in Australian and New Zealand sustainable funds, compared with inflows of US$27 million. of US dollars in the first quarter.
This was almost entirely driven by capital outflows from active strategies, with sustainable passive funds seeing $5 billion in net new capital. These capital outflows caused assets held in sustainable funds to fall from $300 million to $30 billion as of June 30, 2024.
The broader funds management space has also retreated into the sustainable space due to concerns over stricter enforcement from the Australian Securities and Investments Commission on greenwashing.
JP Morgan Asset Management (JPMAM) announced in July that it was closing its two sustainable infrastructure funds, which included an active ETF, because the products had “failed to gain traction” in the Australian market.
At the same time, Schroders announced changes to its sustainable funds, with the Sustainable Global Core Fund being renamed the Global Core Fund.
To explain the change, Schroders said the criteria for sustainable-labeled funds, both in Australia and overseas, had reached “significantly higher standards” since 2020, when the fund was renamed Schroder Sustainable Global Core Fund to better reflect the increased level of ESG integration. and stricter exclusions that had been gradually adopted at that time.
