Escape from green funds: the liquidity crisis hurts ESG

Wealth managers and retail investors are favoring cash over ESG investing in this time of crisis . ESG funds, including the iShares ESG Aware MSCI USA ETF, are seeing significant outflows of funds fleeing to safer destinations. This is a blow to the financial dreams of those who created these ecologically and socially correct funds.

Bloomberg ETF expert Eric Balchunas noted that the sector and its most popular ETF are experiencing significant outflows, with managers seeming truly terrified and eager to get rid of these often underperforming funds as quickly as possible. This seems to show the ESGU fund, i.e. the iShares ESG Aware MSCI USA ETF, one of the biggest and most well-known ways for portfolio managers to gain exposure to “ESG” investments through ETFs.

Balchunas wrote last week that the ESGU ETF "recorded a record $4 billion of outflows" on Friday. That was followed by another $1 billion on Monday.

He stated that he believes the outflows could trigger further outflows: “Friday's ESGU bombshell is a major blow to the ESG ETF category, as it adds to the ongoing reversal in flows, which tends to go hand in hand with the narrative".

The outflows then continued on Monday of this week:

The fund's objective is to “gain exposure to large and mid-cap US stocks, favoring those with favorable environmental, social and governance (ESG) ratings”. So investors prefer yield and security to social and environmental goals, and the moral guide behind the purchase or sale of these securities matters little. We are back to a time when the carbon footprint matters much less than cash flows.

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The article Escape from green funds: the liquidity crisis damages the ESG comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/fuga-dai-fondi-verdi-la-crisi-di-liquidita-danneggia-lesg/ on Wed, 22 Mar 2023 17:45:30 +0000.