While ESG fund managers may have good reasons for building their portfolios the way they do, the gap between the complex strategies they’re applying and the expectations regular people have of what ESG should do is starting to be a problem that’s playing out in real life. “And then you start looking, you’re thinking, why is Facebook in there?” “I don’t want to over-ham it too much, but I felt like I’d almost been had because I thought I was buying into the more ethical side of this,” he said. But finding an ESG fund without big tech was almost impossible, he said. One stock he really didn’t want to own was Facebook parent Meta Platforms Inc. When Neil Baker, a 37-year-old who works in the UK construction industry, started looking for ESG investments less than two years ago, he said he was dismayed at what he found. In the US, they lost 16 per cent, which was only marginally better than the S&P 500.īut perhaps more importantly, doubts about how much good ESG actually does risk becoming a more lasting turn-off for regular people. By the second week of June, European ESG equity funds had, on average, lost 14 per cent, compared with an 11 per cent decline in the Stoxx Europe 600 index. In May, investors made the biggest-ever monthly redemptions from US exchange-traded ESG funds, Bloomberg Intelligence estimates.Īnd ESG returns, which rode out the worst lockdown-induced selloffs, also are starting to sag. It's the worst showing since before the pandemic began and was followed by another decline in April, Bank of America analysts reported. Flows into ESG funds globally slumped 36 per cent in the first quarter, according to data provided by Morningstar Inc. The cracks in the ESG firmament appear to be widening elsewhere, too. After attracting huge amounts of money for three straight years, demand for ESG is cooling. What’s more, some of the biggest names in finance are facing probes of their ESG businesses, with Goldman Sachs Asset Management and the investment arm of Deutsche Bank AG among the most prominent. Retail investors are slowly starting to look under the hood of the US$40 trillion environmental, social and governance industry that’s increasingly steering their savings, and many aren’t liking what they see. But there’s one group whose growing disapproval might be the ultimate game changer. ESG has become a punching bag for the far right, for disgruntled corporate executives and even industry insiders.
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