BlackRock US ESG Flows Fall on Tech Rout, Anti-Green Backlash
Cash flows into US sustainable funds plummeted last year as the broader market took a beating and anti-ESG crusaders targeted money managers including BlackRock Inc. for “woke capitalism.”
ESG exchange-traded funds in the US aren’t faring any better in 2023.
ETFs in the US with environmental, social and governance goals had net outflows of $772 million in January, compared with $953 million of inflows for the first month in 2022, according to data compiled by Bloomberg. Some of the largest withdrawals last month came from funds managed by BlackRock, Invesco Ltd. and Vanguard Group.
BlackRock had zero net flows into its sustainable products in the US last year, according to a person with knowledge of the matter. The company declined to comment.
“Last year there was an enormous, well-coordinated backlash against this topic which just changed the sentiment,” Aniket Shah, global head of ESG strategy at Jefferies Financial Group Inc., said in an interview. “The sentiment came all the way down to financial advisers and individuals deciding where to put their investments.”
The ESG industry in the US faced a reckoning last year, when sustainable mutual funds and ETFs took in a net $3 billion of client money compared with $70 billion in 2021 — a 96% plunge, according to data from Morningstar Inc.
|Net flows ($) for January 2023
|iShares Trust iShares ESG MSCI
|iShares Trust - iShares MSCI K
|iShares ESG Advanced Total USD
|iShares MSCI USA ESG Select ET
|iShares Global Clean Energy ET
|Source: Data compiled by Bloomberg
The political blowback in the US came on top of the worst year for investing in stocks and bonds since the 2008 financial crisis. ESG funds, especially those linked to indexes, were often heavily invested in technology and growth stocks and many had limited exposure to the energy sector, the best-performing part of the S&P 500 index in 2022.