The Asia ex-Japan sustainable fund universe encompasses open-end funds and exchange-traded funds that, through their prospectus or other regulatory filings, claim to focus on sustainability, impact, or environmental, social, and governance factors. This article is adapted from a recent report published by Morningstar Sustainalytics and details regional flows, assets, and launches for the first quarter of 2026.
Exhibit 1: Asia Ex-Japan Sustainable Fund Flows by Country (USD Billion)
China-domiciled sustainable funds recorded USD 639 million in outflows in fourth-quarter 2025, representing a third consecutive quarter of net outflows. The biggest single-fund outflow came from Huatai-PineBridge CSI Photovoltaic Industry ETF, an exchange-traded fund tracking the CSI Photovoltaic Industry Index which saw USD 407 million in net redemptions during the quarter. The index is a free-float, market-cap-weighted benchmark that acts as a barometer for China A-share stocks in the solar power sector. This marked the fund’s third consecutive quarter of outflows, with redemptions accelerating sharply from approximately USD 10 million and USD 24 million in the preceding two quarters.
Sustained Outflows Across the Region
Excluding China, the Asia ex-Japan region posted USD 1.8 billion in net outflows in first-quarter 2025, marking the second consecutive quarter of outflows.
Exhibit 2: Asia ex-Japan Sustainable Fund Flows (USD Billion)
South Korea continued to lead the decline with USD 1.2 billion in outflows, while Taiwan registered USD 733 million in outflows, being the second largest outflow in the quarter. The market’s largest sustainable fund, Cathay Sustainability High Dividend ETF, continued to draw the largest outflows in the market at USD 1.0 billion. Within South Korea, fixed income accounted for most of the outflows mainly due to redemptions from KIM Credit Focus ESG Feeder Bond 1. The fund saw USD 894 million withdrawn during the quarter, its second consecutive quarter of outflows. Thailand continued to stand out as a positive contributor, attracting USD 117 million in inflows, supported by Thai ESG bond funds such as KKP Government Bond Thailand ESG and SCB Thai Sustainability Bond.
Exhibit 3: Asia Ex-Japan Sustainable Fund Flows by Asset Classes (USD Billion)
The quarter saw outflows across asset classes, though equity funds accounted for most of the outflows mainly due to redemptions from Taiwan-domiciled Cathay Sustainability High Dividend ETF. The fund saw USD 1.0 billion withdrawn during the quarter, the third consecutive quarter of outflows.
Assets Decline Modestly Amid Continued Outflows
Total sustainable fund assets in Asia ex-Japan (including China) closed first-quarter 2026 at USD 92.2 billion, down 5.7% from the prior quarter’s reconstituted AUM. Passive funds represented USD 55.0 billion (59.6%), while active funds accounted for USD 37.2 billion (40.4%).
Exhibit 4: Asia Ex-Japan Sustainable Fund Assets (USD Billion)
After China (for which up-to-date data was not available at the time of publication), Taiwan remains the second-largest market, making up roughly one-third of total Asia ex-Japan AUM or two-thirds of ex-China assets. South Korea ranked next with a 6.1% share of total Asia ex-Japan assets, followed by Thailand (3.5%) and Singapore (2.1%), which together complete the top five. By asset class, regional assets are distributed across USD 54.5 billion in equity, USD 22.0 billion in fixed income, and USD 15.4 billion in allocation strategies.
China Dominates New Fund Launch Activity
In first-quarter 2026, nine sustainable funds were incepted in the Asia ex-Japan region. All new launches were in China, including eight passive products and one active strategy: Guotai Haitong Low Carbon Economy Securities Investment Mix A. The Guotai Haitong Low Carbon Economy Securities Investment Mix A is an allocation fund. The equity portion accounts for 60%-95% of the fund’s assets and is primarily invested in securities related to the low-carbon economy theme.
Exhibit 5: Asia ex-Japan Sustainable Fund Launches
Within the passive launches, four tracked the CSI Photovoltaic Industry Index, three tracked new energy themed indices - CSI New Energy Vehicle Index, ChiNext New Energy Index, and CSI New Energy Vehicle Battery Index, and the remaining fixed-income strategy tracked the ChinaBond High-Grade Technology Innovation and Green Bond Index.
For the full report, please visit: Global Sustainable Fund Flows: Q1 2026 in Review
