Investors, firms balking at ESG ETFs

Firms managing investment funds are rebranding or in some cases closing exchange-traded funds (ETFs) that were previously associated with environmental, social and governance (ESG) goals amid political and regulatory pushback.

ESG investing has grown in prominence over the last decade and ESG-themed funds have become increasingly accessible, with leading financial institutions offering ETFs and other investment products that aim to promote corporate policies and practices aligned with ESG goals. 

However, the last few years have seen a growing pushback against ESG investing. Regulators have cracked down on greenwashing by companies exaggerating the sustainability of their operations as well as funds that failed to abide by their stated investment criteria. Several states have cut ties with asset managers over their ESG practices, particularly opposition to fossil fuel production, while the ESG focus on stakeholder value over shareholder returns has turned away some investors.

“About four years ago, it was something that was being marketed from a fund company lineup all the way down to [registered advisers] and financial institutions talking about the ESG offerings they had, and now I don’t hear that being marketed hardly at all except for maybe from financial planning firms who target clients who want to be specifically invested in ESG,” Jim Crider, CEO of Intentional Living FP, told FOX Business.

BLACKROCK’S SUPPORT OF ESG RESOLUTIONS FALLS TO RECORD LOW

Crider said that when ESG investing peaked in the pandemic era, such funds were able to rise along with the broader market, which helped mask disparities in performance that would emerge under other market conditions. After it surged during the 2020 market rebound, the 2022 pullback amid the inflation surge prompted a reevaluation of investors’ priorities.

“At first it was the greenwashing, virtue signaling and the rising tide that lifted all boats that led to the adoption,” Crider said. “And then the drop-off was market pullback, layoffs, tightening on the wallet met with, ‘Hey, what is actually in this thing? I need to prioritize my investments, this thing doesn’t necessarily have the social impact I thought it did, so it’s not accomplishing what I hoped it would from that standpoint, and it’s not having the returns per se, so I need to go back to something more normal.'”

TEXAS PULLS $8.5B FROM BLACKROCK IN STUNNING BLOW TO ESG MOVEMENT

A report by ETF.com citing data from Bloomberg Intelligence found that as of May, at least 20 ESG ETFs were shuttered in the first half of this year after last year saw 23…