The exodus of investors from the United States indicates a historic blow to the market.

Bloomberg – for the first time ESG funds saw net outflows globally In the context of the strong withdrawal of US investors from environmental, social and governance strategies.

According to an analysis by Morningstar Inc. Recently, US fund clients withdrew a net $5.1 billion during the last three months of last year. Combined with Japan's $1.2 billion outflows, this was a very strong decline in European net inflows of $3.3 billion to support the global market.

The global sustainable funds market recorded net redemptions of US$2.5 billion in the latest quarter, representing an all-time low for the sector. In the United States, Doubts about ESG standards come after years of criticism from RepublicansWho accuse this strategy of being “woke” and anti-capitalist. New Hampshire members of Congress have even tried to criminalize environmental, social and governance issues. At the same time, investors are beginning to question the staying power of that strategy, after a long period of poor financial returns on a relative basis.

The US ESG divestment came at the same time as a significant decline in traditional green stocks: the S&P 500 Global Clean Energy Index fell more than 20% last year, compared with a 24% gain for the S&P 500 throughout 2023. American investors declined. Morningstar data showed that the company withdrew a total of $13 billion from ESG funds.

Pull back ESG criteria as well This is due to the failure of managed strategies Actively used by firms like Parnassus Investments to attract clients, according to a Morningstar analysis. Even in Europe, by far the world's largest market for ESG products, fund flows were boosted by $21.3 billion from allocations to passive strategies, while actively managed funds lost nearly $18 billion.

(BLK), the world's largest asset manager, topped Morningstar's sustainable assets under management ranking with $318 billion at the end of the fourth quarter. Of that number, more than $270 billion was passively managed, including through BlackRock's iShares products, according to Morningstar estimates.

he The largest manager of active ESG strategies was Amundi SA, With assets of just over US$84 billion. Amundi's negative bid was almost as large, at $77 billion, making it the third-largest manager after BlackRock and UBS Group AG.

“The disappointing reality is that active managers have once again failed to prevent redemptions in a corner of the market where it is easier for them to establish themselves,” he said in the report. Hortense Peewee, Global Head of Sustainability Research at Morningstar. “In contrast, passive funds have shown continued resilience.”

BlackRock's flexibility within the ESG market comes even though the asset manager often finds itself at the center of Republican-led efforts to ban the strategy. chief executive officer, Larry Fink Who was previously a public advocate for ESG, He said last year that he stopped using that label because it had become too politicized..

Morningstar says its analysis covers a universe of funds that include strategies that claim to be focused on sustainability, impact, or ESG.

Flows into European ESG funds, while still positive, were well below levels seen in the previous quarter, when the strategy attracted $11.8 billion in net new money. Meanwhile, the pace of outflows in the United States was double the $2.7 billion recorded in the third quarter.

A lot of this development We must view it in the context of persistently high interest rates, recession fears and anxiety It's about the spread of war, Morningstar said. However, the researcher's data showed that redemptions in the latest quarter left a greater impact in ESG funds than in traditional portfolios.

The net outflow represents a decrease of 0.1% compared to the total assets of global sustainable funds. For the broader fund universe, net outflows equate to 0.05% of the total, Morningstar said.

However, according to Biwi, the outlook is far from hopeless.

“The overall picture for ESG fund inflow in Q4 may look bleak, but ESG funds in Europe, the largest market by far, have continued to hold up better than the rest of the fund world,” he said.

Buey also noted that the value of global ESG funds' assets continued to rise, rising 8% to $3 trillion in total. This increase is “commensurate with the growth rate of the global mutual fund and ETF market,” according to Morningstar.

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