Instead, it can tweak its actively managed products. BlackRock can't simply divest from companies in the index. But it doesn't mean that companies will lose all of their investments overnight if they are not sustainable enough.Ībout two-thirds of investor money is held in passively managed index funds. What this means for youįink's letter is an important step forward for the sustainability movement, and could influence other financial firms to follow suit. A 2019 analysis of shareholder votes on climate change resolutions showed that BlackRock and Vanguard had the worst voting records in the fund industry. The asset manager had come under increasing criticism for being slow to address climate issues.
And although it will stop investing in companies that get more than 25% of sales from coal, BlackRock will continue to invest in many of the biggest coal producers, which have diversified income streams.
Still, as Bloomberg noted, BlackRock is one of the largest investors in fossil fuel companies, given how many assets it holds. To Fink, that means that company is not a wise investment and does not belong in clients' portfolios. "And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward."Īny executive who does not take climate change seriously, he writes, is harming the long-term prospects of their company. In its place, he predicts, more accurate terms like “climate transition” or “corporate transparency” could take the place of the unwieldly and ultimately meaningless ESG."Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors," Fink writes. Guess what? The Lipper analyst says it’ll only fizzle further. “Every single conversation was about ESG-and there’s a whole industry built around this.įurthermore, companies and funds have been increasingly accused of “greenwashing,” hyping or padding data to show environmental, social and governance support. ESG funds suffered noticeable losses, in lockstep.Īdditionally, at least 165 anti-ESG bills and resolutions have been introduced in 37 states, both red and blue, year-to-date through June 2013, according to climate risk consulting firm Pleiades Strategy.Īs socially responsible investing, which gained traction in the 1990s, morphed into ESG, Jenkins says the decline in interest in this brand of SRI might be a good thing.ĮSG, he maintains, had become a buzzword fad without much substance.ĮSG was the “artificial intelligence of six years ago,” Jenkins says. One major factor has been institutional investors’ aversion to energy and weapons stocks since Russia invaded Ukraine.Īdditionally, last year, ESG funds were overweight technology stocks, which got hammered amid the market volatility and rising interest rates. Taking their cue from BlackRock CEO Larry Fink, who said last month he would no longer refer to ESG because it has become too politicized, company earnings and annual reports have significantly curtailed any mention of ESG.īeyond that, Jenkins says, a confluence of political, geopolitical and market events have stifled-some could say severely damaged-the appetite for ESG. Just look at mention of it in key company documents: It’s nearly nonexistent. really tells the story of the sharp rise in ESG investing commencing shortly after the market recovered from the initial pandemic selloff in 2020, only to take on near meme-stock status in the YOLO (you only live once) 2021, work-from-home bull market,” says Robert Jenkins, head of global research at Lipper.ĮSG reached its final crescendo at the end of 2021-and has been declining ever since.Ĭlearly, ESG is on a downward spiral. investors have withdrawn a whopping $13 billion from these funds since the second quarter of 2022, with $5.7 billion of these redemptions in the first half of 2023. In the past five quarters in the U.S., ESG flows have actually turned negative, according to Morningstar. Environmental, social and governance investing is rapidly losing favor among investors, CNN reports.ĮSG mutual funds and exchange-traded funds worldwide have seen net new flows over the past year slow.
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