Sustainable Flows Turn Negative, Driven by Poor General Market Sentiment
- Net flows: Sustainable fund flows returned to negative territory in Q3 2026, with £5.37bn of net redemptions
- Bonds saw their fourth positive quarter (+£89m), although well short of the £7.50bn taken by conventional equivalents
- Equity US led Q3 inflows at £2.16bn, reversing Q2’s £217m outflow, and exceeding the £1.26bn attracted by its conventional peers
- Equity Global suffered the quarter’s worst sustainable redemptions (-£4.38bn), compared with £8.18bn of conventional equivalents
Sustainable Asset Class Growth
Chart 1: Sustainable Asset Class AUM, 2017 to September 2026 (£bn)
Source: LSEG Lipper
UK responsible investment (RI) mutual fund and ETF assets increased from £240.02bn at the end of 2025 to £263.63bn at the end of September 2026, a rise of 9.84%. Conventional assets grew by 9.02%, from £2.32trn to £2.53trn, raising RI funds’ share of total UK fund assets from 9.38% to 9.44%. That share nevertheless slipped from 9.54% at the end of June, despite RI assets rising from £260.45bn over Q3. It should be noted that this is in an environment of redemptions for both conventional and RI funds (see charts 3 and 4), but where asset growth is more than compensating for these negative flows.
Equities continued to dominate, with assets increasing from £173.59bn at the end of 2025 to £192.03bn, accounting for 72.84% of RI assets. Bonds rose from £32.29bn to £34.31bn (13.01% of RI assets), and mixed assets from £29.96bn to £31.91bn (12.11%). Money market funds held £3.37bn (1.28%). Alternatives more than tripled, from £333m to £1.09bn, albeit from a low base, while real estate reached £852m and commodities £54m.
Despite then negative mood music surrounding such strategies, longer-term expansion remains substantial: RI assets stood at £26.54bn in 2017, accounting for just 1.52% of UK fund assets.
Sustainable Asset Flows
Chart 2: Five-year quarterly flows, to Q3 2026 (£bn)
Source: LSEG Lipper
It was a poor quarter for UK responsible investment flows, although one reflecting the doldrums of the wider market, especially September.
Sustainable fund flows returned to negative territory in Q3 2026 after a brief sojourn in the black over Q2 (a modest £173m), with £5.37bn of net redemptions. This was the largest quarterly outflow since Q4 2025 (-£5.41bn), although considerably below the £10.25bn withdrawn in Q3 2025. Six of the past seven quarters have now been negative, contrasting with consistently positive flows through 2024.
Equity funds once again drove redemptions, shedding £4.75bn, compared with outflows of £452m in Q2. Mixed-assets outflows also accelerated, from £233m to £886m, while real estate reversed Q2’s £48m inflow to lose £50m.
Bond funds remained positive for a fourth consecutive quarter, although inflows slowed sharply from £604m to £89m. Money market funds attracted £180m, while alternatives and commodities added £29m and £16m, respectively. These positive contributions were insufficient to offset the combined £5.69bn redeemed from equities, mixed assets, and real estate.
Sustainable versus Conventional
Flows by Asset Class
Chart 3: Asset Class Flows, Sustainable v Conventional, Q3 2026 (£bn)
Source: LSEG Lipper
Sustainable funds suffered £5.37bn of net redemptions in Q3 2026, compared with £23.68bn from conventional funds, reversing Q2’s modest £173m sustainable inflow.
Equities again dominated redemptions, with sustainable funds losing £4.75bn, compared with £18.01bn for conventional peers. Mixed-assets funds also saw outflows in both segments, at £886m and £1.62bn, respectively.
Bonds remained positive (+£89m), although well short of the £7.50bn taken by conventional equivalents. Money market funds showed a divergence, with £180m of sustainable inflows against £1.93bn of conventional redemptions. Alternatives similarly attracted £29m sustainably, despite £1.09bn of conventional outflows. Commodity funds saw inflows in both segments (£16m sustainable/£177m conventional).
Real estate registered £50m of sustainable redemptions, alongside £8.70bn from conventional funds. Overall, positive sustainable flows to bonds, money markets, alternatives, and commodities were insufficient to offset substantial equity and mixed-assets redemptions.
Chart 4: Asset Class Flows, Sustainable v Conventional, YTD 2026 (£bn)
Source: LSEG Lipper
Sustainable funds recorded £4.84bn of net redemptions over the first nine months of 2026, compared with £25.94bn from conventional funds. Given that RI AUM is less than 10% (chart 1), this indicates that RI funds are losing assets at twice the rate of their conventional peers.
Equities were the largest detractor, with sustainable funds shedding £5.23bn, alongside £28.71bn of conventional redemptions. Mixed assets showed a marked divergence, with £1.73bn withdrawn from sustainable funds while conventional equivalents attracted £9.26bn.
Bonds provided the largest positive sustainable contribution, attracting £1.59bn, compared with £19.81bn for conventional peers. Sustainable money market funds also saw inflows of £407m, despite £3.50bn of conventional redemptions.
Alternatives attracted £138m sustainably, alongside £2.70bn conventionally, while commodity funds saw modest inflows in both segments (£3m sustainable/£513m conventional).
Real estate registered £16m of sustainable redemptions, compared with substantial conventional outflows of £26.01bn.
Overall, sustainable redemptions were concentrated in equities and mixed assets, with positive bond and money market flows providing only a partial offset.
Sustainable Flows by Classification
Fund Flows by Lipper Global Classification, Q3 2026
Chart 5: Ten Best and Worst Sustainable v Conventional Lipper Global Classifications by Estimated Net Sales, Q3 2026 (£bn)
Source: LSEG Lipper
The Q3 2026 classification rankings show a sharp divergence within sustainable equities. Equity US led inflows at £2.16bn, reversing Q2’s £217m outflow, and exceeding the £1.26bn attracted by conventional peers. Equity Emerging Markets Global followed at £421m, against £280m conventionally. Bond Global Short Term (£184m) and Money Market GBP (£180m) were next, the latter contrasting with £2.24bn of conventional redemptions.
Bonds occupied five of the top 10 inflow positions, including Bond Global GBP (£146m/£1.64bn conventional) and Bond Global USD (£102m/£1.54bn). Despite their presence in the ranking, inflows were relatively modest compared with the two leading equity classifications.
On the negative side, Equity Global dominated with redemptions of £4.50bn, compared with £5.47bn from conventional peers. This accounted for more than half the £8.41bn outflows across the bottom 10 classifications. Equity Global Small & Mid Cap ranked second (at -£874m), a marked reversal from Q2’s £308m inflow, despite £176m of conventional inflows in Q3. Equity UK lost £714m, alongside £2.66bn conventionally.
Other notable reversals included Equity Sector Real Estate Global, moving from £197m inflows in Q2 to £395m redemptions, while conventional peers lost £41m. Mixed Asset GBP Aggressive–Global shed £229m, despite £188m of conventional inflows.
The 10 leading sustainable classifications attracted £3.51bn, well short of the £8.41bn redeemed from the 10 weakest, although this is strongly skewed by Equity Global outflows.
Fund Flows by Lipper Global Classification, Year to Date
Chart 6: Ten Best and Worst Sustainable v Conventional Lipper Global Classifications by Estimated Net Sales, Year to Date (£bn)
Source: LSEG Lipper
Equity US led sustainable classification inflows over the first nine months of 2026, attracting £2.26bn, of which £2.16bn came in Q3. This displaced Bond Global Corporates GBP, H1’s leading classification, into second place at £1.30bn, despite £771m of conventional redemptions. Equity Emerging Markets Global ranked third (+£719m), alongside £2.14bn of conventional inflows.
Fixed income nevertheless dominated the positive rankings, with seven bond-related classifications attracting £3bn between them. Bond Global USD (+£542m), Bond Global GBP (+£370m), and Bond Global Corporates USD (+£273m) all attracted inflows alongside their conventional peers. Money Market GBP saw £413m of sustainable inflows, contrasting with £4.64bn of conventional redemptions.
On the negative side, Equity Global dominated, suffering £4.38bn of sustainable redemptions, compared with £8.18bn of conventional outflows. Equity UK followed (-£1.09bn/-£6.05bn conventional). Equity Global Small & Mid Cap lost £903m, despite £680m of conventional inflows, reversing its position as Q2’s leading sustainable classification.
Mixed Asset GBP Aggressive–Global showed another marked divergence, shedding £760m sustainably while conventional equivalents attracted £5.98bn. Bond GBP Corporates also suffered substantial redemptions (-£811m/-£2.50bn conventional), contrasting with the positive flows to global bond classifications.
Overall, the 10 leading sustainable classifications attracted £6.39bn, considerably less than the £10.23bn redeemed from the 10 weakest. Equity Global alone accounted for 42.8% of those bottom-10 redemptions.
Sustainable Flows: Institutional vs Retail
Chart 7: Sustainable Asset Class Flows, Institutional v Retail, YTD 2026 (£bn)
Source: LSEG Lipper
Retail investors drove sustainable fund redemptions over the first nine months of 2026, withdrawing £22.73bn, substantially outweighing institutional inflows of £17.90bn. This left aggregate net redemptions of £4.84bn. Excluding money market funds, redemptions increased to £5.24bn, comprising £22.71bn of retail outflows, partly offset by £17.46bn of institutional inflows.
The divergence has widened considerably since H1, when institutions invested £1.25bn and retail investors withdrew £860m.
This raises the question: is sustainable investing returning to being an institutional strategy—something that was being challenged in the previous decade with the growth of retail interest? Sustainable mandates remain in place with many pension funds and the like, while retail appetite seems to have cooled.
Equities accounted for most of this split. Retail investors redeemed £19.79bn, while institutions allocated £14.55bn, leaving net outflows of £5.23bn. Mixed assets experienced redemptions from both channels (retail -£1.27bn/institutions -£456m).
Bonds showed a reversal from H1, when retail investors had driven inflows. Institutional allocations reached £3.29bn YTD, more than offsetting £1.70bn of retail redemptions, producing net inflows of £1.59bn. Money market funds similarly benefited from institutional demand (+£435m), against modest retail outflows of £28m. Alternatives were an exception, attracting £153m from retail investors against £15m of institutional redemptions. Real estate saw £100m of retail withdrawals, partly offset by £84m of institutional inflows.
Overall, institutional demand provided substantial support for sustainable funds, but was insufficient to counter retail redemptions, particularly from equities.
Flows by Asset Manager
Chart 8: Largest Positive Sustainable Flows by Promoter, YTD 2026 (£bn)
Source: LSEG Lipper
Despite the renewed significant redemptions for equity funds, both sustainable and conventional, the top-10 providers got the bulk of their assets from equities (+£3.56bn), followed by bonds (+£2.38bn).
BlackRock remained the leading promoter of sustainable funds over the first nine months of 2026, attracting £2.92bn. This accounted for 40.7% of the £7.16bn gathered by the 10 promoters shown, despite aggregate sustainable fund redemptions of £4.84bn. Its inflows were dominated by equities (+£1.94bn), followed by mixed assets (+£737m) and bonds (+£240m).
Legal & General moved into second place at £1.02bn, up from £386m at the end ofJune, with £683m from equities, £188m from bonds and £150m from mixed assets. Fairstone followed with £728m, comprising £474m in equities, £186m in bonds, and £68m in alternatives.
HSBC attracted £520m, driven by bonds (£423m) and money market funds (+£413m), despite equity redemptions of £293m and mixed-assets outflows of £23m. Dimensional (+£478m), Robeco (+£421m), and UBS Asset Management +(£389m) relied primarily on equities.
Fixed income dominated at BNP Paribas (£396m of bond inflows, offset by £122m of mixed-assets redemptions) and Fidelity International (£425m bonds, partly offset by £171m of equity redemptions). Insight’s £165m came entirely from bonds.
Across these 10 promoters, equities contributed £3.56bn and bonds £2.38bn.
SDR: AUM and Flows
Chart 9: SDR Categories AUM September 2026 (£bn)
Source: LSEG Lipper
SDR funds struggle to gain traction, comprising just 15.9% of the universe of Lipper Research’s responsible investments.
LSEG Lipper records £41.91bn in SDR-labelled funds at the end of September 2026, up from £40.32bn in June. Sustainability Focus remained dominant at £33.59bn (80.13%), although down from £34.47bn. Sustainability Improvers rose sharply to £4.89bn (11.66%), while Sustainability Impact held £2.31bn (5.51%) and Sustainability Mixed Goals £1.13bn (2.71%).
Chart 10: SDR Categories Net Flows by Asset Class, YTD 2026 (£bn)
Source: LSEG Lipper
SDR-labelled funds recorded £4.43bn of net redemptions over the first nine months of 2026, worsening from £2.84bn at the end ofJune. Equities (-£3.12bn) and mixed assets (-£1.54bn) drove redemptions, while bonds attracted £237m.
Sustainability Focus accounted for £4.19bn of outflows, predominantly equities
(-£2.62bn) and mixed assets (-£1.41bn), with bonds shedding £165m.
Sustainability Impact lost £395m, almost entirely from equities (-£400m), partly offset by £5m of bond inflows.
Sustainability Improvers remained positive (+£201m), as £397m of bond inflows exceeded equity (-£105m) and mixed-assets (-£91m) redemptions. Sustainability Mixed Goals lost £47m, all from mixed assets.
Note that this report has narrowed its focus from broad Sustainable funds—those which indicate some form of Sustainable strategy in their fund documentation—to a smaller set of sustainable funds, defined as all SFDR Article 9 funds plus Lipper Responsible Investment Attribute funds reduced to those containing indicative sustainable keywords in the fund name.
