Global sustainable open end and exchange traded funds saw an estimated USD 27 billion net outflows in Q4 2025, compared with almost USD 55 billion outflows in the previous quarter, according to Morningstar’s Q4 2025 Global Sustainable Fund Review.
Redemptions by large UK institutional investors – reallocating from pooled ESG funds into bespoke ESG mandates – accounted for much of the outflows in both quarters. Yet the broader backdrop remained challenging, with persistent headwinds continuing to weigh on investor appetite.
For the whole of 2025, global sustainable funds saw USD 84 billion in net outflows, which is a sharp reversal from the USD 38 billion in inflows recorded in 2024.
“The ESG fund‑flow picture doesn’t look good, but the figures are somewhat skewed by large European institutional investors reallocating assets from pooled ESG funds into custom ESG mandates. Nonetheless, the wider environment remains challenging, as persistent headwinds, including geopolitical tensions, the ESG backlash, regulatory backpedaling, and mixed performance, continue to weigh on investor appetite.”, Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, explained.
Key takeaways include:
- Sustainable funds in Europe posted net withdrawals of USD 20 billion in the fourth quarter, following the exceptionally large USD 49.6 billion in redemptions in the previous quarter.
- Sustainable funds in the United States saw net outflows for the 13th consecutive quarter, totaling USD 4.6 billion in the fourth quarter of 2025.
- The rest of the world, in aggregate, faced outflows too, a reversal from the previous quarter.
- Despite the outflows, global sustainable fund assets rose by about 4% in the fourth quarter to USD 3.9 trillion, supported by stock market appreciation. Since the end of 2018, global sustainable fund assets have grown more than sixfold from roughly USD 600 billion.
- Product development remained subdued in the last three months, with 40 new sustainable funds launched globally.
- Europe takes up almost 86% of global sustainable fund assets, followed by the United States with 9%, and the rest of the world makes up the remainder. Sustainable funds represent approximately 20% of the overall European open-end funds and ETF universe, compared to just 1% in the US and varying shares across other regions.
The full report can be found by readers using this link.
