Sustainable funds report further outflows in Q3

European sustainable funds saw record outflows in third quarter of 2025 — but this was largely skewed by a client pension fund transferring assets from BlackRock funds in favour of custom ESG mandates, which Morningstar does not collect data for.

In its latest Global Sustainable Fund Flows report for Q3 2025, European-domiciled sustainable funds saw record outflows of $51bn, compared with $11.3bn restated inflows in Q2.

However, when you exclude the move between BlackRock mandates, outflows stand at $3.1bn for the period. This was primarily driven by passive strategies, while active sustainable funds attracted $600m in inflows. 

Sustainable fixed income funds recorded net inflows of $8.6bn, a decline from the restated $10.6bn in the previous quarter, while outflows from sustainable equity funds reached a record of more than $55bn, driven primarily by the four BlackRock ESG strategies mentioned.

European sustainable fund assets rose by 4%, ending Q3 at $3.2trn from a restated $3.1trn as at the end of the June. Sustainable fund launches in Europe reached a record low of 20 over the three-month period, less than half the restated 46 seen in Q2. This, the report said, reflects “a normalisation of product development activity after three years (2020-22) of high growth”.

Looking at global figures, global sustainable funds registered net outflows of $55bn driven by the BlackRock redemptions and the 12th consecutive quarter of outflows in the US. Global sustainable fund assets rose by about 4% in the third quarter to $3.7trn, supported by stockmarket appreciation, the report said.

“The large headline outflows from global ESG funds mask a more nuanced story. Amid macroeconomic uncertainty, geopolitical volatility, and policy shifts, we are seeing significant reallocations, with large sums moving between strategies within asset management firms and into customised institutional mandates,” said Hortense Bioy (pictured), head of sustainable investing research at Morningstar Sustainalytics. 

“Investor appetite for ESG funds will continue to be tested by the ongoing ESG backlash and an evolving regulatory landscape.”

This article first appeared on Portfolio Adviser