Australia and New Zealand’s (ANZ) sustainable fund universe saw positive net inflows of US$640 million in the September quarter, according to new data from Morningstar.

This followed revised outflows of US$555 million in 2Q24.

Morningstar noted that ANZ was one of three regions to report positive inflows over the period, with Europe and Asia (ex-Japan) attracting US$10.3 billion and US$2.5 billion respectively.

Meanwhile, the US experienced outflows of US$2.5 billion, while Japan saw US$600 million and Canada US$100 million.

Overall, the global universe of sustainable funds saw US$10.4 billion in investor flows in the quarter, up from US$6.3 billion in 2Q24.

For Australia's own sustainable fund market, however, Morningstar sees the dominance of a few fund managers continuing to hold the lion's share of the market.

"Australia's sustainable funds market remains fairly concentrated, with the top 10 firms accounting for almost two-thirds of total assets in sustainable funds, which is stable this year," the financial services company said.

Namely, Dimensional Fund Advisors had the highest market share at 14.6%, followed by Betashares (11.9%) and Vanguard (8.6%).

Mercer, BlackRock, Australian Ethical and Pendal have a market share of 4.5% to 6%.

In addition, in the third quarter of 2024 two new sustainable funds were launched – Altor Social Infrastructure and Macquarie Energy Transition Infrastructure – bringing the total to nine product launches in 2024.

"The fund's nine launches so far this year have consisted entirely of active strategies, a significantly lower number than in previous years, particularly from 2020 to 2022," Morningstar said, adding that in 2022 nine sustainable funds have already been launched by the first quarter alone.

Meanwhile, there were five confirmed closings at the end of the third quarter.

"Changes in the interest regime in 2022 have put active asset managers under pressure on profit margins caused by rising cost bases and limited revenue growth.”

The main reasons behind the decision to close, Morningstar added, were limited demand and underrepresentation of sustainable strategies.

However, it said the rise in flows into sustainable funds "reflects the continued recovery in the broader fund market in the region".

Looking at ANZ, flows into active strategies resumed, taking in almost US$267 million. Meanwhile, flows into passive sustainable funds continued to be positive in 2024, raising US$373 million in the quarter.

By the end of September, according to the firm, the mutual fund and ETF universes for Australia and New Zealand had net inflows of US$9.52 billion, driven mostly by passive strategies, which received net inflows of US$6.73 billion, while active strategies had net inflows of $2.8 billion.

Additionally, equity strategies earned about $570 million in net inflows, followed by inflows into fixed income strategies of about $125 million.

"However, distribution funds recorded another quarter of outflows, albeit smaller than the previous quarter," Morningstar said.