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New Hampshire Republicans have introduced two bills that would make it a felony to invest taxpayer dollars in ESG funds. These are investment funds that incorporate environmental, social and governance factors into their portfolios.
Additionally, investment research firm Morningstar just released an analysis showing that for the first time on record, investors are withdrawing more money from ESG and sustainability funds than they are putting into them.
Until recently, investors poured money into ESG and sustainability funds, about $20 billion in 2019 and $50 billion in 2020, according to Alyssa Stankiewicz, who tracks ESG funds at Morningstar. , it is said to have reached $70 billion in 2021.
And over that period, ESG actually produced better returns than traditional investments. Then, in 2022, Russia invaded Ukraine and oil prices plummeted.
“When Exxon and Chevron grew in 2022, sustainable funds did not perform as well as traditional funds because they were not able to benefit from that rally,” Stankiewicz said.
He said the Fed’s anti-inflation measures haven’t helped.
“Focusing on a high interest rate environment can reduce the profitability of activities such as renewable energy construction,” she says.
So part of the ESG setback is simply investors chasing higher returns elsewhere. The other part is politics.
“About 40% of U.S. companies have experienced some kind of backlash, and that backlash can range from healthy skepticism to targets of political opportunism,” said Paul Washington, executive director of the Conference Board ESG Center. “There is,” he said.
Conservatives have accused big financial companies like BlackRock of prioritizing so-called “woke politics” over their fiduciary responsibilities. Therefore, instead of greenwashing, a new term called green hashing has become popular.
“Just because analysts no longer use the term ESG in their earnings calls or in fund prospectuses doesn’t mean they’re going to change what they’re doing,” says Whit Hennis. said a university ESG researcher. The Wharton School in Pennsylvania. “But they self-censor because they don’t want to be criticized in Congressional hearings.”
He said the right way to judge ESG investing is how it performs over the long term, even if it’s not called ESG at the time.
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