Why is BlackRock closing ESG funds?
BlackRock Inc., along with a slew of other firms, has recently shut down funds that overtly focused on ESG (environmental, social and governance) initiatives as the movement faces backlash from conservatives in the U.S. BlackRock announced the closure of two ESG-focused mutual funds on Sept.
Investors pulled more than $8.2 billion from sustainable funds in the first three quarters of 2023. Wall Street rushed to embrace sustainable investing just a few years ago. Now it is quietly closing funds or scrubbing their names after disappointing returns that have investors cashing out billions.
The backstory: BlackRock's bullish outlook on responsible environmental, social and governance investing is being blasted by conservatives as "woke capitalism" and has drawn boycotts from Florida and Texas.
While some skeptics have questioned the long-term sustainability of the ESG movement, it is becoming increasingly clear that ESG isn't going away.
Key Takeaways. Retail investors do care a lot about the ESG-related activities of the firms they invest in, but only to the extent that they impact firm performance, independent of ESG performance.
ESG Large-Blend Equity Funds Bounce Back From 2022′s Lows
In 2023, both sustainable large-blend equity funds and conventional peers lagged the Morningstar US Market Index, but the median shortfall was smaller for sustainable funds than for conventional peers.
An Oil CEO
Some critics saw the BlackRock move as hypocritical because of the emphasis it had placed on climate risk. Critics also pointed to scrutiny of Saudi Arabia's human rights record, because the oil company—the largest oil producer in the world—is part-owned by the Saudi Arabian government.
BlackRock Inc. and other money managers spent years rolling out sustainable funds, seeking to capitalize on surging interest in ESG investing. Now they're abandoning an increasing number of those products in the US amid political backlash and investor scrutiny.
Major financial firms have adopted ESG to keep up with the times–but they also saw it as an opportunity to make lots of money. We can be cautiously optimistic that BlackRock and Vanguard are reverting to what they do best–optimizing client investments for financial growth.
Musk himself became a vocal critic of ESG ever since Tesla was first booted from the S&P 500's sustainability index a year ago. After Fortune reported some two weeks later about allegations over fraudulent ESG investing by Deutsche Bank, Musk claimed all ESG lists were suddenly fraudulent.
Who is pushing ESG?
Over the past decade or so, ESG edicts became embedded into corporate America's ecosystem as big shareholders —BlackRock, but also places like Vanguard and Fidelity — and the shareholder advisory firms like ISS and Glass Lewis increasingly voted in favor of these mandates that pushed companies to reduce their carbon ...
Critics say ESG investments allocate money based on political agendas, such as a drive against climate change, rather than on earning the best returns for savers. They say ESG is just the latest example of the world trying to get “woke.”
Investors want business leaders to focus on ESG, or environmental, social and governance metrics. That means progress on ESG isn't just a nice-to-have anymore. It's something shareholders will demand, because they believe it's going to drive everything else they care about. Growth, market share, profitability.
Anti-ESG lawmaking efforts, which first emerged as a trend in 2021, reached new heights this year with over 150 anti-ESG bills and resolutions introduced in 37 states. Most of these bills were rejected or failed to advance, but as of December 2023, at least 40 anti-ESG laws have been enacted in 18 states.
Socially responsible investing goes one step further than ESG by eliminating or adding investments based solely on a specific ethical consideration. For example, an investor might opt to avoid any mutual fund or exchange traded fund (ETF) that owns the stocks of firearms manufacturers.
The term ESG was popularly used first in a 2004 report titled "Who Cares Wins", which was a joint initiative of financial institutions at the invitation of the United Nations.
Europe maintains its gap with other regions of the world (26.8), well ahead of Oceania (38.9), South America (38.7), North America (39.9), Asia (46) and Africa (56.3). This year, the ESG ranking podium is exclusively Nordic with Finland on top, followed by Sweden (2nd) and Iceland (3rd).
By considering ESG factors, investors get a more holistic view of the companies they back, which advocates say can help mitigate risk while identifying opportunities.
What is ESG Investment Risk? ESG investor risk refers to potential financial losses or negative impacts that can result from investing in companies, assets, or industries that do not align with environmental, social, and governance (ESG) principles and market trends.
ESG stands for environmental, social and governance.
How long have ESG funds been around?
The modern concept of ESG, which we're so familiar with today, took shape in the mid-2000s. However, the principles behind ESG are decades, maybe even centuries, old. It depends on where you draw the line.
At BlackRock, DEI is a business imperative. We know that a diverse workforce is indispensable to our creativity and success. It's how we answer the biggest questions and solve the toughest problems. An inclusive, equitable environment makes us thrive.
Why is BlackRock reallocating assets out of the US economy? — BlackRock is reallocating assets out of the US economy due to concerns about a corporate debt bubble and a looming recession caused by excessive leverage and the Federal Reserve's interventionist policies.
The dark side of ESG investing has the potential to undermine a whole generation of clean-tech strategies. Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, said the risks posed to the renewables boom via the mining industry aren't getting nearly enough attention.
How many companies does BlackRock own? As of November 2023, BlackRock's portfolio consisted of 5,349 holdings. The top five holdings included Apple (AAPL), Microsoft (MSFT), NVIDIA (NVDA), Amazon (AMSN), and Alphabet (GOOGL).
