Europe’s Strictest ESG Funds Hit by Record Outflows

ByTsvetana Paraskova– Jan 29, 2025, 8:30 AM CST

EUimage

Poor returns prompted investors to withdraw record amount of money from the EU’s funds with the strictest ESG standards, a report by market research firm Morningstar has shown.

The EU’s Sustainable Finance Disclosure Regulation (SFDR), adopted in 2021, regulates and classifies funds according to their sustainability. The so-called Article 8 funds are registered as “promoting” ESG goals, while the “greenest” funds, the Article 9 products, are those funds that have sustainable investment as their objective.

‘;
document.write(write_html);
}

In the final quarter of 2024, Article 9 funds saw withdrawals of $7.6 billion (7.3 billion euros)—a record high for any quarter and more than double the outflows in the third quarter, according to Morningstar’s research cited by Bloomberg.

These types of ESG funds saw in the fourth quarter the fifth consecutive quarter of net outflows, the data showed.

The outflows were attributed to the lower returns compared to conventional investment strategies.

“In 2024’s bull market, investors simply preferred conventional equity strategies,” Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, told Bloomberg.

Globally, sustainable open-end and exchange-traded funds (ETFs) saw their highest quarterly inflows in the fourth quarter of 2024, Morningstar said in a report. The inflows into these funds reached $16 billion in the last quarter of 2024, up from $9.2 billion in the third quarter. However, annual inflows halved, contrasting with a booming market, Morningstar noted.

In the United States, sustainable open-end funds and ETFs suffered their second year of outflows in more than a decade, reaching $19.6 billion in 2024 following redemptions of $13.3 billion in 2023, according to Morningstar data.

By contrast, conventional fund peers enjoyed significant inflows of about $740 billion, supported by expectations of interest rate cuts and an AI-related stock rally.

U.S. sustainable funds were hit by poor returns and the growing backlash and political scrutiny against ESG investing, Morningstar said.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com

Join the discussion | Back to homepage

 

  • Related Posts

    Qatar Cuts Prices for Its Oil

    Qatar has followed Saudi Arabia in cutting the price of its al-Shaheen crude for May deliveries, Reuters has reported, citing trade sources. Al-Shaheen for delivery in May will now cost…

    Russia Switches to Crypto in Oil Trade

    Russia is increasingly using cryptocurrencies in its oil trade with top clients China and India amid U.S. sanctions, Reuters has reported, citing unnamed sources, who said Russian oil traders were…

    Have You Seen?

    Oil Prices Rebound on Unclear Path to Ukraine Ceasefire

    • March 14, 2025
    Oil Prices Rebound on Unclear Path to Ukraine Ceasefire

    Qatar To Supply Natural Gas To Syria’s New Government

    • March 14, 2025
    Qatar To Supply Natural Gas To Syria’s New Government

    Iran Sanctions Prop Up Oil Prices

    • March 14, 2025
    Iran Sanctions Prop Up Oil Prices

    Russia Switches to Crypto in Oil Trade

    • March 14, 2025
    Russia Switches to Crypto in Oil Trade

    Qatar Cuts Prices for Its Oil

    • March 14, 2025
    Qatar Cuts Prices for Its Oil

    EPA Says it is Initiating ’31 Historic Actions’

    • March 14, 2025
    EPA Says it is Initiating ’31 Historic Actions’

    Alternative fuels ship regs not likely before 2028 ‘at earliest’

    • March 14, 2025
    Alternative fuels ship regs not likely before 2028 ‘at earliest’

    Air Liquide raises €500m through green bond to support energy shift

    • March 14, 2025
    Air Liquide raises €500m through green bond to support energy shift

    Video: Developing direct air capture, and is it a viable source of CO2?

    • March 14, 2025
    Video: Developing direct air capture, and is it a viable source of CO2?

    Microsoft and SBM Offshore partner on AI for improved floating power tech

    • March 14, 2025
    Microsoft and SBM Offshore partner on AI for improved floating power tech