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Morningstar Inc. says sustainable investment funds saw $22.4 million in net outflows last quarter for the first dip in the segment since the second quarter of 2020.

The market research firm says the outflows weren’t limited to sustainable funds as Canadian long-term funds also lost nearly $4.1 billion, for a 0.2 per cent contraction compared with 0.1 per cent for sustainable funds.

The outflow in sustainable funds though was a notable shift from recent years that saw investors pump significant money into them, including more than $6 billion in net inflows in the first quarter of 2021 alone.

It was only as interest rates started to climb in 2022 that flows began to drop, though sustainable funds still saw expansion of 3.2 per cent in the first quarter and 0.5 per cent in the second quarter.

Passive funds were the source of the outflows, losing $208 million, while actively-managed funds saw inflows of more than $185.7 million.

Active funds were also the only source of new products in the quarter with no new passive options launched for only the second time in the past three years.

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