Environmental, social and governance (ESG) exchange-traded funds (ETFs) are experiencing their biggest ever net outflows in a month. This raises questions about the influence of political currents and the fact that ESG currently seems to be losing popularity.
In the first quarter, outflows from US ESG ETFs totalled around $4.6bn, a considerable sum. It is important to note that these outflows are concentrated in a few funds, suggesting that this is not a mass exodus from ESG. At the same time, political backlash against the sector has led to a cautious attitude, which explains the lack of inflows.
When we look at ESG ETFs, we can distinguish several categories. There are ESG funds, which take general account of ESG risks and opportunities, and which tend to overweight the technology sector and underweight the energy sector. There are also thematic funds, such as those focusing on climate, gender equality or carbon markets, each concentrating on its own theme.
Demand for ESG funds is falling and their liquidation is accelerating. Currently, 26 ESG funds have been liquidated, compared with 36 the previous year, representing 30% of total ETF liquidations.
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