ESG highlights for financial advisers
- UK reaches hottest May day on record – the UK broke heat records two days in a row last Monday and Tuesday, with Kew Gardens hitting 35.1 °C, and Cardiff exceeding 32 °C,. The previous May record was 32.8 °C, in 1944.
- Green bond issuance jumps up – issuance of labelled green bonds rebounded to over $240bn in Q1, rising 18% on the previous quarter. While green bonds continue to dominate overall supply, social bond issuance also increased, driven largely by Europe.
- SBTi shifts its focus from targets to delivery – the Science Based Targets initiative (SBTi) has launched a new 2026–2030 strategy, placing greater emphasis on helping companies deliver against their climate commitments, rather than simply setting and validating targets. The move reflects a broader shift across sustainable investing: clients are increasingly focused on measurable progress and real-world outcomes. Expanded sector coverage and more tailored guidance could help improve consistency and accountability across industries.
- Electric vehicles helping to lower Australian emissions - Australia’s emissions are beginning to decline and the country has seen annual drops of around 2% as rapid growth in renewable energy, battery storage, and electric vehicle adoption reduces reliance on fossil fuels. This marks positive early progress toward their climate targets, albeit from still high per‑capita levels.
Sustainable fund flows show signs of recovery
Source: Morningstar Direct. Data as of May 2026
Why this matters
After a challenging 2025, sustainable funds have started 2026 on a more positive footing.
Morningstar's latest Sustainable Fund Flows Report shows global sustainable funds attracted net inflows of around $3.5bn in the first quarter of the year. Inflows were dominated by Europe who invested around $9.1bn, mainly into passive products. This was then somewhat dampened by the US, which saw a further $4.3bn drawn from sustainable funds. The rest of the world also saw outflows on aggregate, with the exception of Canada, Australia, and New Zealand.
It's worth noting that 2025’s weaker figures were driven artificially lower by a number of large institutional investors moving out of pooled investment vehicles and into their own ESG segregated mandates (and so removing them from Morningstar’s database).
Even allowing for this, so far 2026 represents a clear turnaround in demand. A trend that we hope to see continuing throughout the next few quarters.
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