AUM in Europe in these funds now stand at €684bn, and last year saw the launch of 290 ESG-oriented open ended and exchange-traded funds.
In its report, The evolving approaches to Regulating ESG Investing, Morningstar says: "While 2018 saw a 40 per cent dip in flows to €37.4bn from the previous year's €57.9bn, it was a lot less than the 80 per cent slump in flows to the overall European fund universe.
"Passive sustainable funds bucked the overall trend with an increase in assets of 5.3 per cent to €76.9bn."
A big driver in Europe is the regulatory initiative, where the European Commission has committed itself to fighting climate change, and sees the financial system playing a big role in this.
The report says: "The commission estimates that an investment gap of €180bn per year must be filled to achieve the 2030 targets that the Eu is committed to as part of the Paris Agreement [and others}."
Likewise the Financial Conduct Authority has consulted on climate change, to see where regulatory focus should be targeted, as has the Prudential Regulation Authority.
In the United States, green investing has become a more divisive issue where the Department of Labor under Donald Trump has tried to weaken Obama-era guidance, which intended to make it easier for retirement plans to offer sustainable investments as options.
A big issue is how to define ESG and sustainable investments, so that different products can be directly comparable.
Again Europe is way ahead of the US on this, but there are signs of changes within US regulators. Last year the SEC was petitioned by the US forum for Sustainable and Responsible Investment, which called for more disclosure.