U.S. sustainable investment fund net flows turned positive for the first time in nearly four years in the second quarter of 2026, according to a new report by investment insights and data provider Morningstar, with investors adding nearly $3 billion, and sustainable fund assets rising to a record of nearly $400 billion.
The report found that the inflows in the quarter were driven by demand for electricity infrastructure and energy transition themes, and continued strong flows into passive strategies.
According to the report, estimated global sustainable net inflows into sustainable funds, excluding China, were $3.7 billion in Q2 2026, marking the second consecutive quarter of positive flows. By region, Europe once again led net inflows at $3.5 billion, followed by the U.S. at $3.0 billion, offset by outflows in other regions including Asia, Canada, Australia & New Zealand and Japan.
Globally, Morningstar found that global sustainable fund assets reached an estimated $3.7 trillion, reaching a new record for the category, and increasing from $3.5 trillion at the end of the previous quarter, driven primarily by market appreciation.
While the market globally continued to see positive inflows and market appreciation, product development remained relatively subdued in the quarter, according to the report, with 32 new sustainable funds launched globally, up from 17 in the prior quarter, but still below 50 in Q4 2025. 16 of the new funds were launched in Asia, and 13 in Europe, while 3 new funds were launched in the U.S., up from zero in the prior quarter.
The positive flows in the U.S. followed 14 consecutive quarters of outflows, according to Morningstar. By fund type, passive strategies in the U.S. attracted $6.5 billion of net flows, offsetting $3.6 billion of redemptions in active funds, while both equity and fixed income funds saw net inflows in the quarter. Morningstar also noted that investor demand in the quarter appeared to focus on energy transition infrastructure and technologies to increasing power usage from AI and data centers, with the First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index ETF dominating inflows at $3.1 billion.
The report also found that U.S. sustainable fund assets increased to a record $398 billion at the end of Q2 2026, increasing 13% from $350 billion in the prior quarter, supported primarily by strong performance. Passive assets increased from $167 billion to nearly $199 billion during the quarter, and now account for roughly half of sustainable funds in the U.S., according to the report, while equity funds continue to dominate at around 85% of assets.
Globally, Europe continues to dominate the sustainable fund universe, with $3.1 trillion in assets, or approximately 84% of global sustainable fund AUM, followed by the U.S. at 11%, according to Morningstar.
Click here to access the report.
