2024 Sustainable Fund Trends: Index ETFs Are the Silver Lining

Navigating global crosscurrents, total assets under management (AUM) in sustainable funds grew at high single-digit rates in 2024. Nevertheless, these growth rates represented a meaningful slowdown compared with prior years. The sustainable ETF category, which is 91% index-based, grew a healthy 19%, which was still below the growth in conventional ETFs. This report, a follow-up to the 2023 review of sustainable funds, examines 2024 trends in the sustainability category based on data from ISS MI MarketPulse.

Regulatory, economic, and investor preferences reveal a mixed picture for sustainable fund assets and flows in 2024. While sustainable assets grew by 9% and net flows remained positive at about 2% of prior-year assets, this growth was lower than that of conventional funds for the first time in at least five years. Europe and North America, which jointly account for approximately 97% of sustainable fund assets, show contrasting trends. In addition, ETFs (20% of sustainable fund assets) remain the relative bright spot, with more robust growth reflecting the appeal of index-based sustainable strategies. This analysis focuses on the overall equity and fixed income funds categories, which totaled $49.7 trillion in total AUM globally as of December 2024.

The distinction between sustainable and conventional funds relies upon the Morningstar classification available on MarketPulse. “Unclassified” funds are included within the conventional category. Based on this definition, there are $46.9 trillion in conventional funds and ETFs while $2.8 trillion are in sustainable funds and ETFs, as shown on Table 1. Drilling down, the majority of sustainable AUM, around 85%, is domiciled in Europe (including “International funds”).

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