ESG performance woes continue (2022)
| Environmental, social, and corporate governance |
|---|
|
| • What is ESG? • Enacted ESG legislation • Arguments for and against ESG • Opposition to ESG • Federal ESG rules • ESG legislation tracker • Economy and Society: Ballotpedia's weekly ESG newsletter |
Bloomberg's Katherine Greifeld reported September 2, 2022, that ESG fund returns were underperforming anti-ESG strategies and trailing the market as a whole, while inflows were shrinking:[1]
“In late 2021, Cathie Wood’s ARK Investment Management introduced its first exchange-traded fund with a socially conscious bent. Less than eight months later, the ARK Transparency ETF was shuttered—the firm’s first-ever closure—and Wood declared on Bloomberg Television that 'there was a lot of slapping lipstick on a pig' in the environmental, social, and governance investment industry.
"ARK’s experience is part of a broader ESG reckoning. After two years in which more than $32 billion flowed into US exchange-traded funds with an ESG focus, investors have put only about $4.5 billion into such ETFs in 2022. Seven have closed, and US and European regulators are starting to crack down on claims made by fund creators.
"Inflows of $4.5 billion in a year when almost every asset class is underwater is far from a death knell. About $40 billion has been invested over the past decade in US-listed ETFs that emphasize ESG principles, according to Bloomberg Intelligence. The amount allocated to sustainable investment funds altogether is about $2.5 trillion, researcher Morningstar Inc. estimates.
"But the ESG crown has been slipping: The investor base is highly concentrated, many funds cast too wide a net to appeal to single-issue investors, and several high-profile greenwashing scandals have tarred the industry’s virtuous image….
"This year has delivered a double blow to performance. Technology shares, which are heavily represented in ESG portfolios, have suffered from soaring inflation and higher interest rates, while the war in Ukraine has made a winner out of energy shares, which many ESG funds exclude. Just 3% of the 166 US-listed ESG stock funds have positive returns in 2022, vs. about 9% of overall exchange-traded stock funds, Bloomberg data show. The Point Bridge GOP Stock Tracker, which goes by the ticker MAGA and invests in companies that support the Republican Party, is down about 3% as of Aug. 30 yet was outperforming the S&P 500’s 16% drop….
"Meanwhile, regulators are sharpening their focus on labeling. In the US, the Securities and Exchange Commission may soon require additional disclosures about how ESG principles fit into managers’ investment strategies. And in Europe, Morningstar stripped the ESG label from almost a quarter of funds claiming to promote sustainability because they fell short of standards. That lack of nuance is muddling the message for investors looking to put money behind their principles, says Ben Johnson, Morningstar’s head of client solutions for asset management. While more-targeted funds focus on specific issues such as clean energy and diversity and inclusion, the bulk of ESG assets are held in broad-based index-tracking funds. 'My ESG is not your ESG is not the next person’s ESG,' says Johnson. 'It’s inherently subjective.'”
See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
| |||||||||||||||||||||||
