Of course, observing this outflow of funds does not address the critical question: why are investors pulling money from ESG funds? First, as stated in the report, sustainable funds underperformed conventional funds over the past year (a median of 20.8% for sustainable funds vs. 23.8% for conventional funds), which could lead to withdrawals from ESG funds in the interest of nothing more than greater returns. Still, the fact that sustainable fund closures outpaced launches in the fourth quarter of 2023--seven new sustainable funds launched (and one existing fund re-classified as a sustainable fund) while sixteen sustainable funds were closed--does serve as a countervailing factor indicating a broader trend in the market. Nonetheless, one explanation for the decline in monies invested in ESG funds deserves particular scrutiny: the political climate in the United States. Rather, this could simply reflect a changing climate and a desire by companies to avoid any controversy associated with ESG investing.

Source: New York Times February 02, 2024 10:39 UTC