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ESG funds are entering the new year on shaky ground after mixed performance and record outflows in 2023.
After a tough 2022, many green funds experienced a second year of underperformance as rising interest rates and rising energy prices continued to pressure the asset class.
The renewable energy and infrastructure-heavy strategy hit its toughest stretch last year, but Morningstar data prepared it. financial news is shown.
The Global
Global X, owned by Mirae Asset Financial Group, was also home to the second and third worst performing companies. The company’s Solar ETF fell 36%, and its China Clean Energy ETF fell 35%.
In the UK, the £536m Schroders Global Energy Transition Fund, which claims to be free of fossil fuels and nuclear energy, posted a 14% loss, while the Gravis Clean Energy Income Fund and Edentree・Green Infrastructure Fund decreased by 13% and 10%. According to Morningstar, respectively.
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EdenTree fund manager Tommy Christophersen said listed infrastructure will be one of the worst-performing areas of the market in 2023, with stocks trading at historically large discounts to the net asset value of the underlying assets. He pointed out that
“We believe the Edentree Green Infrastructure Fund has performed well among the funds in this group,” he said.
Mr. Schroders and Mr. Gravis declined to comment. Global X did not respond in time for publication.
Green funds have faced declining investor sentiment in recent years. Investors have pulled record amounts of money out of sustainable funds this year amid concerns about poor performance, a politically-driven anti-ESG backlash in the US, and potential greenwashing.
The UK recorded seven consecutive months of capital outflows from ESG funds, with net outflows reaching £1.2bn in October and November, according to data from Calastone.
As a result, many asset management companies in Europe have stalled or canceled the launch of ESG funds.
the only way is up
But for other ESG strategies, 2023 wasn’t the terrible year many expected.
Funds with exposure to the technology sector were big winners last year, with an unexpected turnaround despite rising interest rates.
The best-performing UK sustainable fund, the Janus Henderson Sustainable Future Technologies Fund, rose 30%, according to Morningstar.
Meanwhile, in Europe, the Nikko AM ARK Positive Change Innovation Fund, a greener version of Cathie Wood’s flagship fund, rose 52% for the year.
read FN’s most read ESG and diversity articles in 2023
According to Morningstar, semiconductor ETFs made the biggest gains last year. The Amundi MSCI Semiconductors ESG Screened Ucits ETF rose a massive 72%, triple his MSCI World’s 23% rise.
Despite the turnaround for some green funds, Ryan Hughes, investment director at AJ Bell, said the future of the sector remained uncertain this year.
“Given the growth bias, the prospect of lower interest rates could be positive for many ESG-focused strategies,” Hughes said. “However, companies that have ridden more and more of the epic seven waves need to be aware that there is valuation risk given the price-to-earnings ratios that some parts of the market are currently at.
“Perhaps more important is how the industry understands the Financial Conduct Authority’s sustainability review in the UK and what this means for funds in this sector. We move forward to 2024. ”
To contact the author of this article with feedback or news, email Kristen McGachey
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