The latest Sustainable Reality Report from Morgan Stanley reveals that sustainable fund assets under management (AUM) reached a record $3.5 trillion globally in the first half of 2024, reflecting a 3.9% increase from the end of 2023. However, fund inflows have slowed significantly, with only $20 billion added, representing 0.6% of year-end AUM.

Sustainable funds modestly outperformed traditional ones, with median returns of +1.7% compared to +1.1% for traditional funds, driven primarily by equity exposure. In particular, funds investing in the Americas saw impressive returns of +8.8%, while European funds struggled with -0.1%. Lower volatility also supported sustainable funds' performance.

Despite their performance, sustainable funds saw weaker inflows than traditional counterparts, which posted a 2.5% AUM increase. North American-domiciled sustainable funds recorded a 3.6% outflow, partially offset by inflows in Europe and Asia.

The report highlights how the sustainable investment landscape is maturing, with a growing reliance on equity markets and a widening performance gap across regions.

Key Points:

Global AUM: $3.5 trillion, up 3.9% from 2023.
Modest Returns: Sustainable funds returned +1.7%, outperforming traditional funds.
Weak Inflows: $20 billion in 1H 2024, down from previous years.
Regional Performance: Strongest in the Americas with +8.8%, weakest in Europe at -0.1%.

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