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 second quarter of 2026.
Exhibit 1: Asia Ex-Japan Sustainable Fund Flows by Country (USD Billion)
Outflows Persist
Excluding China, the region recorded USD 1.9 billion in net outflows this quarter. Taiwan led the decline, registering USD 1.6 billion in outflows, a 78% increase from the previous quarter. South Korea also contributed significant outflows, with USD 456 million in net outflows.
Taiwan’s outflows were primarily driven by Taiwan’s Cathay Sustainability High Dividend ETF, the largest fund in the region, which recorded an outflow of USD 1.3 billion during the quarter. This fund has now experienced four consecutive quarters of outflows, with the magnitude of redemptions increasing each quarter.
Exhibit 2: Asia ex-Japan Sustainable Fund Flows (USD Billion)
For the third consecutive quarter, the region (excluding China for the most recent quarter) saw outflows across both passive and active strategies, totaling USD 2.8 billion. Reduction in active fund outflows was the key driver in the USD 873 million net reduction in outflows from the first quarter to the second.
Exhibit 3: Asia Ex-Japan Sustainable Fund Flows by Asset Classes (USD Billion)
Across asset classes, excluding China flow data for the most recent quarter, outflows persisted in the second quarter of 2026. Equity outflows continued to be the largest among the asset classes, whereas allocation net fund flows were subdued.
China Continues to Lead Fund Launches
In the second quarter of 2026, 16 sustainable funds were incepted in the Asia ex-Japan region, increasing from nine launches in the first quarter. For the second consecutive quarter, China was the only country within the region to launch new funds.
Exhibit 4: Asia ex-Japan Sustainable Fund Launches
Among the new products developed, six are active strategies, and the other 10 are passive products. In terms of asset class, 11 of the new funds are equity strategies, while five are allocation strategies.
In particular, a recurring theme this quarter is a focus on the battery industry. Five of the 16 new funds are explicitly tracking the CNI’s New Energy Battery or NEV (New Energy Vehicle) Battery Indexes, highlighting an emphasis on China’s energy storage sector.
For the full report, please visit: Global Sustainable Fund Flows: Q2 2026 in Review
