After years of touting Environmental, Social, and Governance (ESG) principles, major financial asset managers are dissolving related ESG funds. This move is attributed to backlash from Republican states.
On September 15th, BlackRock announced its ridding of two ESG mutual funds. BlackRock joins others—State Street Corp., Janus Henderson Group, and Columbia Threadneedle Investments—in dissolving ESG funds altogether this year, bringing the total amount of dissolved ESG exchange-traded funds (ETF) and mutual funds to 12.
This is part of a trend playing out against ESG-aligned investment strategies.
Alyssa Stankiewicz, a Morningstar sustainability analyst, remarked ESG-related ETFs are closing in 2023: “What we’re seeing is that the ESG ETFs that have been launched are more likely to still be alive [compared with non-ESG ETFS]. However, when you look at the different closure rates, it does look like the closure of ESG ETS has picked up in 2022 and then 2023.”
However, BlackRock is still doubling down on ESG ETFs valued at “$9 million of assets, an environmental solutions ETF with about $3.7 million and a sustainable global equity mutual fund with about $10 million.” And despite this, financial asset managers like BlackRock aren’t abandoning ESG fully just yet.
Earlier this year, BlackRock CEO Larry Fink lamented over ESG becoming too weaponized, saying, “I’m not going to use the word ESG because it’s been misused by the far left and the far right.”
Nevertheless, his company is still invested in ESG and in supporting the transition away from fossil fuels through decarbonization efforts.
In his annual Chairman’s letter, Fink wrote, “Transition toward lower carbon emissions will reflect the regulatory and legislative choices governments make to balance the need for secure, reliable and affordable energy with orderly decarbonization.”
ESG funds generally ‘perform poorly.’ An assessment by Columbia University and the London School of Economics of self-identified ESG mutual funds versus non-ESG mutual funds tracked from 2010 to 2018 determined the former had worse environmental, social, and governance metrics than non-ESG ones.
The ESG pushback is undoubtedly working. Financial Times reported, “There’s been a turn in the narrative of late, with anti-ESG investing on the rise and short sellers keen to tell us about how the space has dumb money chasing mediocre and mislabelled assets.”
To learn more about ESG funds, go HERE.