According to the research house’s quarterly Global ESG Flows update, which covered the three months to 31 March, there were six fund closures and one launch.
The funds that closed were Mirova Global Sustainable Equity, Neuberger Berman Global Sustainable Equity, Betashares Future of Food ETF, Betashares Solar ETF, ASB Investment Funds Positive Impact, and BlackRock Global Impact (Aust).
Three of these closed within three years of being launched, it said, and indicates “tough conditions” for fund managers as margin pressures have risen.
However, it is half the 12 funds that closed during the fourth quarter that included funds from Magellan, BNP Paribas, and Maple-Brown Abbott.
The only new sustainable fund to be launched was the VanEck Gold Bullion ETF.
Part of this relates to fund providers’ nerves about regulatory greenwashing scrutiny, with Mercer and Vanguard having already faced penalties of US$7 million and US$8 million, respectively, for false or misleading representations. As a result, several fund managers have already begun to rename or close ESG or sustainable strategies to avoid accusations of misleading conduct.
Total funds under management in Australasian sustainable funds sit at US$31 billion ($48.5 billion), having risen by US$4 billion during the quarter.
There were overall positive net flows into the Australasian universe of US$305 million, primarily driven by passive strategies that gained US$272 million compared to US$33 million going into active strategies. Some 40 per cent of strategies reported inflows, while 39 per cent saw outflows and 21 per cent had no reported flows.
Fixed interest sustainable strategies were particularly popular, the firm said, with inflows of US$148 million compared to US$101 million into equities.
Looking at specific sustainable fund providers, Dimensional has grown its market share to move beyond its rivals at 17.1 per cent compared to 14.6 per cent at the end of June. This was followed by Betashares that held 12.1 per cent and Vanguard Investments Australia that held 8.7 per cent.
The top 10 firms account for 68 per cent of total assets held in sustainable funds, it said, which is unchanged since the first quarter of 2024.
| Firm | Market share |
| DFA Australia Limited | 17.1% |
| Betashares Capital | 12.1% |
| Vanguard Investments Australia | 8.7% |
| BlackRock Investment Management (Australia) | 5.9% |
| Australian Ethical Investment | 5.3% |
| Pendal Institutional Limited | 4.7% |
| Russell Investment Group | 4.4% |
| Mercer Investments (Australia) | 4% |
| State Street Global Advisors (Australia) | 3.4% |
| U Ethical | 2.7% |
Global closures
However, the closures experienced in Australasia were far smaller than worldwide closures, with 64 European products either liquidated or merged while the US saw 20 funds closed.
“Funds that struggle to attract assets or deliver good returns are increasingly prone to closing down. We view this as a natural evolution of the industry, where only the better performing and popular strategies will survive,” it said.
There was also a high prevalence in rebranding activity that “reached a new high” in the quarter, with an estimated 335 European funds rebranding their environmental, social and governance (ESG) naming. This includes adding, dropping, or changing ESG-related terms to reflect their investment objective and portfolio as European managers seek to meet new anti-greenwashing regulations.
“ESG” was dropped by 128 funds, while more than 90 funds dropped the words “sustainable” or “sustainability”’. “Screened” was the most common word to be added to a fund’s label.
There were 47 funds launched in Europe and Morningstar said there has been a cool-down in these launches over recent quarters.
“The cool-down of sustainable fund launches in recent quarters, compared with previous years, reflects a normalisation of product development activity after three years (2020–22) of high growth, during which many asset-management firms hastened to build their core sustainable fund ranges to meet the growing demand,” it said.
“Asset managers have also become more cautious in their development of new ESG and sustainable strategies because of greenwashing accusations and uncertainty around regulations.”
