The state of sustainability is hard to keep up with. It’s human nature to want clear, identifiable trends that indicate a clear-cut trajectory. However, ESG is more complex than that. Multiple contradictory datapoints emerge on an almost daily basis. Here’s one that’s encouraging for sustainable finance on the global level. A recent Morningstar report indicates that sustainability funds posted positive inflows for the first time in four years.:
“Global sustainable funds, excluding China, attracted an estimated USD 3.7 billion in net inflows in the second quarter of 2026. First-quarter inflows have been restated to USD 800 million following the incorporation of China’s first-quarter data, which are reported with a one-quarter lag. The second-quarter estimate excludes China’s flows because these were not available at the time of publication. Europe remained in positive territory, gathering USD 3.5 billion, although inflows slowed from a restated USD 8.2 billion in the first quarter. Passive sustainable strategies attracted USD 11.4 billion, while active funds recorded USD 7.8 billion in outflows. US sustainable funds returned to positive territory for the first time since 2022, attracting nearly USD 3.0 billion. Index-tracking funds drove the recovery.”
While this data is encouraging on a global level, the report notes that the inflows are largely driven by European and U.S. investments. Meanwhile, Canadian, Australian, and Japanese sustainability funds posted net outflows. The reversal of U.S. sustainability fund trends is particularly interesting. The report tracks outflows back to Q3 2023, and Q2 2026 marks net inflows for the first time since then. The report notes that investments in clean energy generation for AI data centers underpin these inflows. However, it’s not all good news. The report also notes that sustainable fund closures largely outpace new fund launches, creating fewer larger funds. We’ll have to wait until Q3 data is available to know if net inflows are a new trend in the U.S. or a flash in the pan.
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