A new report from Refinitiv says that European investors have begun removing their money from ESG funds in 2022 as AUM across the whole fund industry has declined from €15.3trn to €13trn over the first nine months of the year.
In that time, the Let’s Talk About ESG report says that ESG-related money market funds saw outflows of €93.1bn, while ESG-related long-term products saw inflows of just €0.3bn over the first three quarters of 2022.
Detlef Glow, head of Lipper EMEA Research at Refinitiv, was the author of the report.
He wrote: “Given the current market environment, it is no surprise that assets under management in the European fund industry declined over the course of the year 2022 from €15.3trn at the end of December 2021 to €13trn at the end of September 2022. The negative performance of the underlying markets contributed negative €1.9trn to the decline, while estimated net flows summed up to negative €332.6bn as of September 30, 2022. Equity funds (€5.3trn) held the majority of assets, followed by bond funds (€3trn), mixed-assets funds (€2.3trn), money market products (€1.4trn), alternative Ucits funds (€0.6trn), real estate funds (€0.3trn), ‘other’ funds (€0.1trn), and commodities funds (€0.1trn).”
He added: “In more detail, €3trn of the assets in equity funds were held by ESG-related funds, while €1.5trn of the assets in bond funds were held by ESG-related funds. These two classifications were followed by mixed-assets funds, for which €1trn were held by ESG-related funds. Within money market products, €0.7trn were held by ESG-related funds. In the segment of alternative Ucits funds, €0.1trn were held by ESG-related funds and €0.1trn were invested in ESG-related real estate funds. Unsurprisingly ‘other’ funds (€10bn), and commodities funds (€6bn) held only a very limited amount of their assets in ESG-related products.”
Refinitiv offered some suggestions as to why the European fund industry witnessed outflows from these products, citing the discussion around ‘greenwashing’ and ‘missing clear standards’ around the Sustainable Finance Disclosure Regulation. These products, it said, are somewhat in-between as they support ESG criteria, but do not have a formalised ESG-driven investment approach.
The report comes a week after Bloomberg reported that hundreds of funds may lose their ESG designations, despite seeing inflows over almost €13bn in the last quarter. Dozens, Bloomberg, reported have already lost their Article 9 tag.
That piece quoted Hugo Gallagher, senior policy adviser at the European Sustainable Investment Forum, who said: “I am somewhat mystified at the continuing inflows. I can only suspect that it’s due to many end-investors not being entirely cognizant of the ambiguities around Article 9.”
