Canada defied a global slowdown in sustainable fund flows to start the year, amassing US$1.7 billion to go along with 26 fund launches, a report from Morningstar Inc. says.

“Despite a tumultuous start of the year, sustainable investments have conspicuously garnered interest from investors,” the report said.

Assets in Canadian sustainable funds grew 0.3% in the quarter, compared with quarter-over-quarter growth of 11% in the last quarter of 2021. The US$26.3 billion in sustainable funds at the end of March represented 44% year-over-year growth, Morningstar said. (All figures are in U.S. dollars.)

Canadian fund companies launched 26 products in the first three months of the year, more than the previous two quarters combined. The new products collected a total of $376 million, the report said, with the Wealthsimple North American Green Bond Index ETF garnering $154 million.

Even with the new bond fund’s success, the Canadian market is still skewed toward equities.

“The distribution of assets invested in sustainable funds continues to lean precipitously towards equity strategies at 72%, fixed income at 21%, and the remainder to allocation and alternatives,” the report said.

Canada was a rare market with positive quarter-over-quarter flows into sustainable funds this year, Morningstar said. Globally, sustainable funds attracted $97 billion in Q1, a 36% drop from the previous quarter.

However, that decline was less emphatic than the dip for other funds.

“Amid investor concerns over inflationary pressures and the war in Ukraine, sustainable funds still held up better than the broader market, which saw inflows slump by 73% over the period,” the report said.

New product launches also slowed globally and sustainable fund assets declined by 4% to $2.77 trillion.

Morningstar’s global sustainable fund universe includes open-end funds and ETFs that claim to focus on sustainability, impact and ESG factors.