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ESG fund fees tumble on outflows

Source: fnlondon.com

TL;DR

ESG fund fees in Europe fell sharply in 2025 amid outflows and shrinking assets.
ESG equity funds generated $739m in fees, down 31% year-on-year per Fitz Partners data.
Managers lose a key revenue source as ESG products fail to boost profits.

The story at a glance

Financial News reports that ESG fund fees tumbled in 2025, based on exclusive data from fund fee analysts Fitz Partners. The article, part of the asset management newsletter by David Ricketts and published February 4, 2026, highlights ESG funds' shift from high-margin stars to struggling products with heavy outflows. This comes as European ESG funds face investor exodus after years of hype.

Key points

ESG funds once promised premium fees for asset managers but now struggle with outflows and cannot contribute much to profits.[[1]](https://www.fnlondon.com/articles/why-esg-fund-fees-are-tumbling-0d21950e)
Fitz Partners analysis shows ESG funds recorded their biggest annual decline in revenue last year (2025), the worst since the 2020 boom.[[2]](https://primary.fn-nextjs-app-stg.sc.onservo.com/articles/why-esg-fund-fees-are-tumbling-0d21950e?mod=author_panel)
ESG-focused equity funds in Europe generated $739m in fees in 2025, a 31% drop from 2024, per data shared exclusively with Financial News.[[3]](https://www.linkedin.com/posts/huguesgillibert_esg-fund-revenue-nosedives-in-europe-amid-activity-7425123531270664193-qDlF)[[4]](https://www.fnlondon.com/articles/esg-fund-revenue-nosedives-in-europe-amid-investor-exodus-e10d26be)
Revenue plunge ties to investor pullbacks, with global ESG outflows reaching $84bn in 2025 amid poor performance and backlash.[[5]](https://global.morningstar.com/en-eu/sustainable-investing/esg-funds-2025-closes-with-continued-outflows-amid-persistent-headwinds)
Covers retail share classes of European funds, excluding ETFs, amid broader fee pressures on sustainable products.

Details and context

The article frames ESG funds' fee drop as a reversal from their peak, when they were marketed for high returns to managers. Heavy outflows shrank assets under management, directly cutting fee income since charges are typically a percentage of AUM. Fitz Partners' data focuses on Europe, where ESG equity funds saw the sharpest hit.

This aligns with ongoing trends: ESG funds faced net outflows globally for years, driven by underperformance in high-rate environments and political pushback. Competition has also pushed net expense ratios lower, with US ESG funds averaging 9.5-12.7 basis points below non-ESG peers after waivers.[[6]](https://sustainablefinancealliance.org/wp-content/uploads/2025/06/GRASFI_2025_paper_201.pdf)

European regulators like ESMA note overall fund costs declining due to cheaper new launches, with ESG funds often cheaper than peers despite higher gross expenses.[[7]](https://www.investmentexecutive.com/news/fund-costs-declining-thanks-to-new-launches-esma)

Key quotes

Omit: No direct quotes reliably sourced from the article.

Why it matters

ESG funds no longer reliably pad asset managers' bottom lines, squeezing profits in a low-fee industry. Investors benefit from cheaper sustainable options, but managers may cut launches or merge underperformers. Watch 2026 flows and any fee stabilization amid regulatory scrutiny on greenwashing.