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MIND THE GAP

Time to retire the ‘ESG’ label on funds

The regulatory landscape for ESG/sustainable funds is shifting and may cause a shake-out. Investors should take stock of their objectives against fund mandates

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Genevieve Cua

Genevieve Cua

Published Mon, Apr 22, 2024 · 05:00 AM
    • ESG (environmental, social, governance) investing burst on to the investment landscape just as the climate crisis was intensifying. Conflated with sustainability, ESG investing has been a persuasive marketing hook for funds.
    • ESG (environmental, social, governance) investing burst on to the investment landscape just as the climate crisis was intensifying. Conflated with sustainability, ESG investing has been a persuasive marketing hook for funds. PHOTO: PIXABAY

    SUSTAINABLE investing has been all the rage in recent years. Funds with a sustainable or environmental, social and governance (ESG) label are typically marketed as an opportunity to reap returns as you do good.

    But the sheen from that proposition appears to be fading, even as regulators impose guidelines to ensure that funds do as they say, and to mitigate greenwashing.

    Morningstar data for 2023 recorded the first quarterly outflows in the fourth quarter for global sustainable funds. For US sustainable funds, outflows totalled around US$13 billion for the year, including US$5 billion in the fourth quarter alone. Fund launches in the United States also declined.

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