“It’s actually going to fade a little bit from its marquee nature, it’s just going to be a part of sound business strategy and management,” said Jenkins. “As data and disclosures move towards more standardization, ratings and analytics adjust for biases and become more transparent and aligned,” he said.ĮSG won’t be as glamorous as it was before, but it won’t be a politically explosive term either. That’s all part of the maturation process, he said. Jenkins sees what’s happening now as a winnowing of the responsible investing sphere. That, in turn, hurt the movement’s reputation. They’re all saying the same thing.’”Ĭompanies jumped on to the bandwagon and greenwashing, a marketing tactic to appear environmentally conscious in investments, became prevalent. “I was going to conferences two to three years ago, and I remember walking out and thinking ‘these guys aren’t saying anything new or different. These funds’ outsized investments in tech stocks and lack of energy stocks (which was the only positive sector in 2022), led to noticeable losses last year.īreaking the trend: “I think ESG was overly trendy and it got caught up in itself,” said Jenkins. Responsible investing funds also came up against mighty economic headwinds last year. Increased scrutiny also played into political differences around ESG investing and opened the door to vocal critics.īecause of a partisan divide, about half the states in the United States are enacting provisions to block efforts to invest in state-run investment accounts with an ESG lens, Lipper found. Russia’s ongoing war in Ukraine forced traders to reconsider investing in energy and weapons stocks. Instead, a confluence of political, geopolitical and market events has severely damaged interest in ESG investing. The average overall return for these funds was 2.2% in March - outperforming the 12-month moving average return for the wider market by 2.8 percentage points. It’s not that the funds are underperforming, either. In March alone, total assets under management in the responsible investments fund market fell by $6.8 billion. What’s happening: Total assets under management in ESG funds fell by about $163.2 billion globally during the first quarter of 2023 from the year before, according to data shared exclusively with CNN by Lipper. ![]() Instead, it should be integrated into the fundamental analysis of every investor. A new, more efficient system is taking shape that incorporates ESG standards into the bedrock of stock valuations, he said.ĮSG investing as a separate entity could be on its way out, but the approach was wrong to begin with, said Jenkins. ![]() He sees this as a natural phase of the market’s evolution. They’re currently weathering a “perfect storm of negative sentiment,” said Robert Jenkins, head of global research at Lipper, a financial data provider.ĭespite the gloomy forecast, Jenkins remains optimistic. Environmental, social, and governance-focused funds, which were once deemed the darlings of Wall Street, may be on the way out.
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