US fund managers suffered their worst-ever quarter for ESG-focused products as the pace of client redemptions intensified.
Author of the article:
Bloomberg News
Frances Schwartzkopff
Published Apr 25, 2024 • 2 minute read
(Bloomberg) — US fund managers suffered their worst-ever quarter for ESG-focused products as the pace of client redemptions intensified.
Client withdrawals from US funds targeting environmental, social and governance goals reached $8.8 billion in the first three months of 2024, according to fresh data compiled by Morningstar Inc. That stood in stark contrast to the roughly $11 billion of inflows into ESG funds in Europe, where sustainable investing regulations are far more entrenched.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O’Connor, Gabriel Friedman, Victoria Wells and others.
- Daily content from Financial Times, the world’s leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
SUBSCRIBE TO UNLOCK MORE ARTICLES
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O’Connor, Gabriel Friedman, Victoria Wells and others.
- Daily content from Financial Times, the world’s leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
REGISTER / SIGN IN TO UNLOCK MORE ARTICLES
Create an account or sign in to continue with your reading experience.
- Access articles from across Canada with one account.
- Share your thoughts and join the conversation in the comments.
- Enjoy additional articles per month.
- Get email updates from your favourite authors.
Sign In or Create an Account
or
Article content
Article content
It’s the latest sign that US investors are turning their backs on the investment strategy, which has been targeted by high-profile Republicans as woke and anti-American in its design. At the same time, many core ESG industries such as wind and solar have suffered setbacks, leading to poor returns and further alienating many investors.
“Sustainable funds have been facing many headwinds in the past couple of years, including elevated energy prices, high interest rates and an ESG backlash in the US,” said Hortense Bioy, global director of sustainability research at Morningstar.
The scale of redemptions from US ESG funds dragged down global inflows, which were a modest $900 million in the first quarter, Morningstar said. Japan had $1.7 billion of outflows, while the rest of Asia, as well as Australia and New Zealand, saw little to no change.
The development comes as investors wait to see how elections across the globe affect green policies that are likely to impact ESG investment strategies. In the US, Donald Trump and President Joe Biden are polling neck-and-neck. And in Europe, European Parliament elections are likely to give parties that have voiced skepticism toward green policies a bigger foothold in the bloc’s legislature.
Article content
The global development reflects “caution ahead of key elections in the US and Europe which will determine the pace of future green policies and encourage or discourage more sustainable practices,” Bioy said.
When taking stock price gains into account, global sustainable fund assets rose 1.8% last quarter to just under $3 trillion at the end of March. The organic growth rate, however, was close to zero, compared with growth of 0.5% in the broader funds universe, according to Morningstar.
The market researcher looked at open-end funds and exchange-traded funds that, by prospectus or other regulatory filings, claim to focus on sustainability; impact; or environmental, social, and governance factors.
(Adds details on ESG fund universe performance versus conventional funds; methodology in final paragraphs.)
Article content