Sustainable Funds in Canada Show Signs of Recovery Amid Mixed Performance in Q1 2024

July 26, 2024 – The landscape of sustainable investing in Canada is witnessing a notable rebound as the first quarter of 2024 unfolds, with net inflows into sustainable funds reaching an estimated CAD 193.3 million. This marks a significant turnaround from the outflows experienced throughout 2023, signaling renewed investor interest in environmentally and socially responsible investment options.

Despite the positive inflow figures, the performance of sustainable funds has been mixed. According to the latest report from Morningstar, 58% of sustainable funds found themselves in the bottom half of their respective peer groups during the first quarter. Notably, Canadian sustainable balanced funds struggled, with a staggering 67% landing in the bottom quartile. In contrast, sustainable allocation funds, particularly those in the Global Neutral Balanced category, performed relatively well, with 26% achieving top-quartile results.

The broader Canadian fund universe also experienced growth, adding CAD 13.2 billion in assets, outpacing the sustainable funds sector for the first time. This trend highlights a growing preference among investors for traditional funds, even as sustainable options gain traction. Fixed-income funds emerged as the standout performers, with over 64% landing in the top half, while equity funds lagged behind, with only 42% achieving similar success.

In terms of product development, the sustainable fund market remains active, with six new funds launched in Q1 2024. However, this figure is a stark contrast to the all-time high of 39 funds launched in the same quarter last year. Notably, for the third consecutive quarter, no new passive sustainability-focused products were introduced, indicating a shift towards actively managed funds.

Full report is available at https://www.morningstar.com/en-ca/lp/sustainable-investing-landscape