A new Morningstar report has chronicled a robust rate of growth in the Aussie sustainable market, with $1.5 billion of estimated flows in the three months to March, the second-highest quarterly flows on record – only beaten by the quarter before, which totalled $1.8 billion.
Retail assets invested in the region’s sustainable funds have surged by 54 per cent year-on-year.
Inflows during the past year of $4.2 billion have been split predominantly towards actively managed strategies, which gained $2.7 billion, or 60 per cent of the total over their passive counterparts.
There are 129 Australian and New Zealand-domiciled sustainable funds available to investors, according to Morningstar. Of these funds, 97 have some form of exclusion from investment in controversial areas, with 96 banning tobacco and 90 boycotting controversial weapons.
The local market is still relatively small compared to Europe and the US, the report noted. There were no new funds launched in the first quarter, after 13 were established in the 2020 year.
But the Aussie market has remained concentrated, with the top 15 funds accounting for 52 per cent of total assets invested in sustainable funds.
Australian Ethical and Vanguard remain the dominant providers, each with around a 20 per cent market share. In addition to the pair, BetaShares, Dimensional and Pendal gained the majority of inflows in the first quarter.
Equity managers also captured the bulk of inflows over the first quarter, with $859 million, well ahead of the $379 million accumulated by allocation strategies and $253 million by fixed-income strategies.
Compared to their international peers, Australians were found to be paying slightly less for sustainable equity and fixed-income funds, in contrast to traditional or non-sustainable products. Morningstar has put this down to a higher proportion of lower-cost passive products in the Australian sustainable investment universe, compared to the broader market.
