Europe has recorded its first-ever net outflows from sustainable funds, according to data published today.
The latest global figures published by Morningstar show open-ended and exchange-traded funds (ETFs) identified as ‘sustainable’ suffered record outflows in the first quarter of 2025.
Amid geopolitical uncertainty and the clampdown on ESG in the US and elsewhere, investors withdrew an estimated $8.6bn (€7.55bn) from eligible funds. Morningstar said this was “a stark reversal” from $18.1bn of inflows observed the previous quarter.
“Europe recorded its first quarter of net outflows since we started tracking this universe, with redemptions totalling approximately $1.2bn, while US investors pulled capital for the tenth consecutive quarter,” the firm said.
“Asia also saw net outflows, though Canada and Australia/New Zealand attracted net new money.”
Heavier utilities lean into private climate funds
The update comes as fellow data giant MSCI published its latest transition finance tracker, which found that assets in publicly-listed funds dedicated to climate investing grew by nearly 20 times between 2017 and 2024. Combined, such funds managed $560bn.
Equivalent funds in the private markets – of which MSCI identified just over 200 – accounted for around $119bn of assets, according to the study.
More than 40% of those were set up between 2021 and 2023, and they include strategies focused on private equity, venture capital, private credit and a hybrid.
Around 70% of investments in climate funds were made to companies or assets based in the US, in both public and private markets.
“Japanese companies and assets represent 5.1% of publicly-traded climate fund holding – the second-largest country exposure after the US,” observed MSCI.
Emissions from listed companies account for 19% of global greenhouse gas emissions, while the Scope 1 emissions of the 65,000 companies in private-asset funds contribute nearly 13%, the research found.
Private-market funds allocate 40% of their overall assets to utilities, compared with just 8% of climate funds focused on public markets.
MSCI described utilities as “an emissions-intensive industry that offers significant opportunities to support the energy transition”.
Utilities have the largest Scope 1 emissions because of their reliance on fossil fuels for electricity generation, although many in Europe are moving towards greener sources of energy.
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