Global sustainable funds have made a comeback, marking a notable improvement from the outflows seen in the previous quarter, according to data published today.
The latest global figures published by Morningstar show that global ESG funds recorded an estimated net $4.9bn (€4.16bn) in the second quarter of 2025.
This recovery was driven by European investors, with ESG funds drawing $8.6bn of net inflows over the past three months, after redeeming $7.3bn in the prior quarter, the firm said.
This rebound comes after Europe recorded its first-ever net outflows from sustainable funds in the first quarter of the year, which saw investors withdraw an estimated $8.6bn (€7.55bn) from ESG funds.
However, the US saw outflows from sustainable funds for the 11th consecutive quarter, with withdrawals totalling $5.7bn, while the rest of the world attracted $2bn in aggregate.
“Despite the ESG backlash and the volatility sparked by geopolitical tensions and US tariffs, the picture for ESG funds improved last quarter,” said Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics.
“European investors have returned to ESG funds, marking a notable reversal from the redemptions seen in the previous quarter.
“While it’s still doom and gloom in the US, ESG funds in other parts of the world continue to attract money and regulators outside the US are largely maintaining their course,” she added.
ESMA guidelines
Renaming activity in Europe also reached a record high in the second quarter, according to Morningstar, with asset managers implementing the EU’s fund naming guidelines issued by the European Securities and Markets Authority (ESMA).
Close to 600 funds were renamed over the past three months. In total, the firm estimates that at least 1,346 funds, or 24% of our European fund universe, representing about $1trn in assets, have been renamed over the past 18 months. These include 785 that dropped ESG-related terms, 458 that changed ESG-related terms, and 103 that added ESG-related terms.
“In the second quarter, asset managers scrambled to meet the May deadline for renaming funds under ESMA’s guidelines, leading to a record number of name changes. Notably, many funds removed the acronym ‘ESG’ or related terms entirely from their names,” said Bioy.
“However, many opted to replace these with alternative terms that still signal differentiation and, in practice, continued consideration of ESG factors. Overall, the impact of the guidelines on investment strategies and portfolios appears to be limited.”
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