The past few months have seen a growing backlash against environmental, social, and corporate governance (ESG).
This is driven by concerns about greenwashing, confusion about metrics and performance, and even pushback on the grounds that responsible or sustainable investment is “woke” and a politicisation of market forces.
Concern that asset managers are promoting funds as ESG without commitment analysis has led to accusations that investors are being misled.
The offices of Deutsche Bank and DWS were raided as part of an investigation into whether the group was consistent and credible in its ESG and “green” claims.
Goldman Sachs is reportedly under investigation by the US Securities and Exchange Commission (SEC) over its ESG funds and in May 2022 BNY Mellon Investment Advisers paid a penalty over SEC concerns about claims that its investments had all been done under an ESG review, without that in fact being the case.
ESG market inflows falter for the first time in six years
Investment flows have shifted too. According to Bloomberg, May 2022 saw outflows from ESG funds for the first time in nearly six years. Investors have put $300 billion (£254bn) into ESG funds in the past three years, and the annual trend has been consistently upwards – $30bn (£25.4bn) in 2019, $94bn (£79.5bn) in 2020 and $159bn (£134.6bn) in 2021.
May reportedly saw inflows of $400 million (£338.5m) against a 2021 average of $11bn (£9.3bn) – a serious shift in direction….
