Several large asset management firms in the US have closed over twenty environmental, social, and corporate governance (ESG) funds in 2023 due to poor performance and amid greenwashing allegations. The US SEC also recently adopted a new rule to clamp down on funds that falsely advertise ESG strategies.<\/p>\n
Prominent money managers like BlackRock have been ditching their ESG funds lately due to increasing political backlash and investor scrutiny related to greenwashing concerns. According to Morningstar data, asset management firms like Columbia Threadneedle, Janus Henderson, and State Street, among others, abandoned over 20 ESG investment products in 2023.<\/p>\n
Earlier this month, the world\u2019s largest asset manager, BlackRock, informed regulators it plans to close a pair of sustainable emerging-market bond funds, with total assets under management of roughly $55 million.<\/p>\n
Although the US had 656 ESG funds as of June 30, the number of liquidations has risen compared to earlier years. More sustainable funds have been shut down in 2023 than in the three previous years combined, Morningstar data revealed. Furthermore, investors withdrew more capital from the funds in the first half of 2023 than they deposited.<\/p>\n
\u201cWe have definitely seen demand drop off in 2022 and 2023.\u201d<\/p>\n
\u2013 Alyssa Stankiewicz, associate director for sustainability research at Morningstar, told Bloomberg. <\/cite><\/p>\n This downtrend has been primarily attributed to the declining performance of sustainable funds and investors\u2019 concerns over greenwashing. ESG funds have also been scrutinized by Republican officials, who argued the products harmed states dependent on fossil fuels, such as Texas and West Virginia.<\/p>\n But that\u2019s not the end of fund managers\u2019 woes. On Wednesday, the US SEC passed a new rule to crack down on greenwashing and other misleading market practices by US investment funds.<\/p>\n In particular, the securities regulator amended the 2 decades-old \u2018Name Rule,\u2019 which now requires that 80% of a fund\u2019s portfolio match the asset advertised by its name. The move is meant to tackle a boom in funds across Europe and the US that have attempted to exploit investors\u2019 interest in ESG funds, many of which do not accurately reflect their investment strategies.<\/p>\n \u201cA fund\u2019s investment portfolio should match a fund\u2019s advertised investment focus. Such truth in advertising promotes fund integrity on behalf of fund investors.\u201d<\/p>\n \u2013 the SEC chair Gary Gensler said.<\/cite><\/p>\n Financial reform proponents allege that billions of dollars are invested in popular sustainable funds that may even endorse fossil fuel productions and do not meet the ESG goals promoted by their names.<\/p>\n This article originally appeared on The Tokenist<\/i><\/p>\n Sponsored: Tips for Investing<\/b><\/p>\n A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.<\/p>\n Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses,\tconsider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.<\/p>\nSEC Passes a Regulatory Change to Crack Down on Funds Greenwashing<\/h3>\n