Once the darling of Wall Street, the do-gooder investment movement has fallen on hard times.
Driving the news: Environmental, social, and governance (ESG) funds saw a record US$8.6 billion pulled by investors last quarter, a sign that investors globally are souring on the once-buzzy ESG movement.
- The EU, which had championed the movement and holds 84% of the $3.2 trillion held in ESG funds, was a net seller of the funds for the first time ever.
- U.S. investors pulled US$6.1 billion from ESG funds, while Canada was one of the only countries that was actually a net buyer in the quarter.
Zoom out: The green energy sector has felt the brunt of the ESG pushback. The S&P Global Clean Energy Transition Index, which measures the performance of big companies in the clean energy industry, has fallen back down to levels last seen five years ago.
- The index is down over 64% from its 2021 peak, and some experts have pointed out that the decline has been completely out of line with the actual performance of the companies.
Why it matters: On top of the funds' poor performance, the appetite for so-called ethical investing has faded in the face of festering recession fears and rising global conflict. Until people start feeling a little more optimistic, ESG is likely to stay on the back burner.—LA