Net inflows into sustainable funds increased to US$30.6 billion in the second half of 2024, nudging global green AUM to a new high of US$3.56 trillion. According to a new report from the Morgan Stanley Institute for Sustainable Investing, the rising interest in green investment vehicles was accompanied by a dip in performance versus traditional funds. Sustainable funds posted a median return of 0.4% in the last six months of 2024, compared to an average 1.7% returned by traditional funds, marking the first such period of underperformance since the first half of 2022. The institute attributed some of the relative underperformance to sustainable funds having a higher exposure to Europe than traditional peers, which are typically more strongly weighted toward the Americas and Asia-Pacific. However, the sustainable funds that did invest in the Americas or Asia-Pacific outperformed traditional funds in those regions. By year-end, sustainable funds’ total AUM registered an increase of 0.9% since June 2024 and 4.8% since December 2023. However, their share of total AUM declined, falling to 6.8% in 2024 from 7.3% at the end of 2023, due to stronger ongoing inflows into traditional funds. In 2024, sustainable fund inflows totalled US$54.7 billion, just over half of the more than US$100 billion in new assets added in both 2023 and 2022. Separately, the Association for Financial Markets in Europe reported that global assets in funds with an ESG mandate – including mutual funds and exchange-traded funds – increased 11% in 2024, with total inflows exceeding US$300 billion.
