In its landscape report for the first half of 2024. the ETF provider said demand for ESG products was at its lowest in a decade.

It said: “Despite the undeniable importance of ESG factors in both business practices and personal consumption, investor dollars do not beat equally. ESG and sustainable investing have taken a backseat and have seen a decline in momentum recently.

“With ESG momentum falling, some may wonder if this is just a passing trend that peaked during the COVID-19 pandemic. Given the cyclical nature of trends, ESG seems to have passed the baton to the next hot topic in AI.”

There's also a one-year wait for a sustainable ETF to launch this year – the Russell Investments Sustainable Global Opportunities Complex ETF, which launched in April. This is the firm's first global equity ETF in Australia.

The launch of the product brought the total number of registered sustainable funds to 45, which cumulatively held $111 billion or 5.6 percent of funds under management in the June 2024 quarter.

An Adviser Ratings survey found Australians are focused on wealth preservation rather than responsible investing, with a survey of 2,100 Australians finding that only 38 per cent consider ESG factors in their investments.

"This figure is indicative of a wider shift in sentiment among consumers who are increasingly prioritizing immediate financial stability and long-term wealth protection over social and welfare management considerations amid a cost-of-living crisis," Adviser Ratings said.

In July, Morningstar's quarterly report on global ESG fund flows found that A$800 million (S$1.2 billion) was lost from sustainable funds in Australia and New Zealand, compared with inflows of US$27 million in the first quarter.

This was due almost entirely to outflows from active strategies, as passive sustainable funds saw $5 billion in net new money. Outflows saw assets held in sustainable funds fall by $300 million to $30 billion as of June 30, 2024.

The broader fund management space is also retreating into the sustainable space due to concerns about greater enforcement by the Australian Securities and Investments Commission on greenwashing.

JP Morgan Asset Management (JPMAM) announced in July that it would close its two sustainable infrastructure funds, which include an active ETF, because the products "failed to gain traction" in the Australian market.

Meanwhile, Schroders has announced changes to its sustainable funds, with the Sustainable Global Core Fund being renamed the Global Core Fund.

Explaining the change, Schroders said the criteria for sustainability-labelled funds, both in Australia and overseas, had reached "significantly higher standards" since 2020, when the fund was renamed the Schroder Sustainable Global Core Fund. to better reflect the increased level of ESG integration and stricter exceptions that were gradually adopted at that time.