– Launches of funds with environmental, social, or governance (ESG) attributes sharply declined in the past six months, dropping from 55 in the first half of 2023 to just six in the second half.
– ESG labels have been removed from some fund names, with Abrdn planning to drop “sustainable leaders” from two funds in February, and Morgan Stanley and UBS also eliminating ESG-oriented labels from some funds in the previous year.
– ESG strategies faced increased scrutiny from regulators, politicians, and clients, leading to a decrease in fund launches and label removals.
– Performance played a role in the decline of ESG fund investments, with ESG broad-market funds outperforming conventional counterparts in 2019-2021 but experiencing a slip in 2022 and 2023, according to Morningstar.
– More than 120 funds were either renamed or updated to reflect the use of ESG factors between January 2018 and late last year, according to Morningstar’s data.
– ESG fund outflows in 2023 were influenced by a single ETF, BlackRock’s iShares ESG Aware MSCI USA ETF (ESGU), which lost over $9 billion in assets as it was removed from a BlackRock model portfolio.
– The SEC updated rules in September, requiring funds advertising ESG factors to have at least 80% of their assets invested in accordance with their names, giving asset managers at least two years to comply.
