Following political pushback over the environment, social, and governance (ESG) investing and a rocky market, sustainable funds and ETFs (exchange-traded funds) saw a major hit in last year’s fourth quarter, according to a report.
The Financial Times reported that a recent Morningstar report revealed sustainable U.S. mutual funds and ETFs bled $6.2 billion in the last quarter of the year after seeing an inflow of $10.2 billion in the first quarter of the year. With that, they only netted $3 billion in 2022 to end the year with $286 billion in net assets. The report noted:
Nearly all of those net inflows happened during the first three months of 2022, when investors piled $10.2bn into the funds, the report shows. During the second quarter, they pulled $1.6bn from the funds and added $459mn to them during the third quarter.
In contrast, all US mutual funds and ETFs bled $370bn in 2022, marking the first year of net outflows since Morningstar began tracking data in 1993.
Outflows from sustainable funds were largely driven by market volatility, as well as by the conversation around sustainable investing becoming “increasingly marked” by greenwashing concerns and political backlash against environmental, social and governance-focused investing, the report noted.
Additionally, the Financial Times noted from the Morningstar report that investors have pulled out $2.4 billion from passively managed sustainable funds in the fourth quarter, which was the steepest outflow in over three years.
“Within the sustainable funds universe, overall, passive funds have definitely seemed more resilient than active funds,” said Alyssa Stankiewicz, the associate director of sustainability research at Morningstar, who also co-authored the report. She also noted that even though the sustainable funds recorded worse returns than the non-sustainable counterparts for the majority of last year, they managed to “close the gap” in the fourth quarter.
“If you think about how returns are influencing flows, it would be interesting to see the tide turn on flows during the fourth quarter, right after the three quarters of underperformance and right before sustainable funds start to take off,” Stankiewicz said.
This happened as Republican officials, especially state treasurers, have taken aim at the ESG policy movement. Throughout last year, state treasurers have been focusing on educating Americans on the dangers of ESG policies and have blacklisted numerous asset managers who push ESG rules in investing, such as BlackRock. In fact, multiple states have pulled out billions of dollars of state pension funds from asset managers who push such investing strategies.
Jacob Bliss is a reporter for Breitbart News. Write to him at jbliss@breitbart.com or follow him on Twitter @JacobMBliss.
