The Environmental, Social, and Governance (ESG) movement is rapidly losing its luster—even on Wall Street. 

ESG funds are closing at alarming rates. Morningstar reports in Q3 of 2023 that investors withdrew more than $2.7 billion from sustainable funds—following four straight quarters of net withdrawals for ESG funds. In 2023 alone, investors have reportedly pulled $14.2 billion from ESG funds thus far citing factors like “rising energy prices, high interest rates, concerns about greenwashing, and political backlash.” And the Securities and Exchange Commission, an agency eager to force ESG by regulatory fiat, announced it is dropping it from its list of 2024 compliance priorities. 

Even the Big Three of ESG investing—BlackRock, State Street, and Vanguard—turned against shareholder proposals that prioritize non-financial goals over conventional investment strategies this year.

An October 2023 Morning Consult poll revealed only 20% of investors report they have ESG funds. This is backed up by a new ESG Attitudes Survey from the Association of Investment Companies showing Wall Street investors are also souring on these sustainable funds. Support for ESG investing hovers at 53% today—down from 66% two years ago.

This is in stark contrast to a 2019 Business Roundtable statement of principles urging corporations to forgo maximizing profits for stakeholder capitalism that prioritizes investing on social and political lines.
As I recently noted at at RealClearMarkets, the ESG movement overall fading but its backers are seeking new investment workaround to keep it alive:

The Environmental, Social, and Governance (ESG) movement is facing setbacks due to its diminishing popularity, poor investment fund performance, and pushback by Republican states. Desperate to keep ESG afloat, its proponents have devised a workaround through natural asset companies (NACs) to assign a value to nature and ecosystem services they produce.

The BBC has described the demise of ESG as follows: “The fragility of the entire ESG movement – and in some aspects, a major catalyst for its downfall – may well lie in its name, which has morphed into an umbrella catchphrase with little concrete meaning.” 

The ugly truth about ESG funds is they perform poorly in financial settings. ESG investment also invites greenwashing and virtue signaling through carbon offsetting, for instance, which does all but lower carbon emissions.

To learn more about ESG investing, go HERE.