BlackRock, State Street among asset managers closing ESG funds
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 U.S. amid political backlash and investor scrutiny.
State Street Corp., Columbia Threadneedle Investments, Janus Henderson Group and Hartford Funds Management Group Inc., among others, unwound more than two dozen ESG funds this year, according to data from Morningstar Inc.
Last Friday, BlackRock told regulators it, too, intends to close a pair of sustainable emerging-market bond funds with total assets of about $55 million.
While the U.S. had 656 sustainable funds as of June 30, according to Morningstar data, the number of liquidations is increasing from prior years. More U.S. sustainable funds have closed in 2023 than the prior three years combined, the data show. Investors pulled more money from the funds in the first half of the year than they put into them.
“We have definitely seen demand drop off in 2022 and 2023,” Alyssa Stankiewicz, associate director for sustainability research at Morningstar, said in a phone interview.
The closings underscore shifting fortunes for sustainable investing as returns disappoint investors and anti-ESG rhetoric persists. Some sustainable funds fared poorly last year because they were weighted toward growth strategies that underperformed in 2022, while others struggled to gather assets, Stankiewicz said.
Money managers are now “cleaning up the shelves” by closing products that didn’t attract interest and launching new and more specific or different strategies related to sustainable investing, she added.
Money poured into sustainable investing products in 2020 and 2021, when
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