(Bloomberg) -- ESG funds in Asia have doubled their global market share as political and regulatory upheavals slow inflows for environmental, social and governance investing in the US and Europe.
Asia funds posted net inflows of 15% in 2022, compared with just 4% globally, Barclays Plc analysts including Dave Dai wrote in a note. That doubled Asia’s ESG fund market share to 4%, from 2% at the end of 2020, they said.
Asia’s net inflows into ESG stock and bond funds compared with 5% for non-ESG funds in the region, showing “stronger investor appetite for sustainable investing,” the analysts wrote.
Asia’s growth coincides with an intensifying backlash against sustainable investing in the US. Republican states denouncing it as “woke capitalism” have threatened to pull billions from BlackRock Inc. over its ESG strategies. Meanwhile, Europe’s fund managers are grappling with tighter rules that have resulted in some €175 billion ($190 billion) of funds downgraded from the strictest ESG category, Article 9, to a less stringent one.
Amid these headwinds, Asia is “catching up quickly,” Dai notes. The region has “large growth potential” with countries making net-zero commitments and regulators launching new ESG rules, while disclosures from companies are improving, Dai said.
“The changing landscape supports ESG investing to expand,” he said.
--With assistance from Frances Schwartzkopff and Tasneem Hanfi Brögger.
©2023 Bloomberg L.P.
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