the staff of the Ridgewood blog
Ridgewood NJ, a new Morningstar analysis confirms what many financial experts have long predicted: U.S. investors are pulling out of ESG funds at record rates in favor of higher returns.
ESG Investing: A Fading Trend?
Environmental, Social, and Governance (ESG) investing has been marketed as a way for investors to support companies with responsible corporate practices. The idea is to avoid businesses engaged in unethical or unsustainable activities while promoting those that align with progressive social and environmental goals.
But in the past two years, investors have been fleeing ESG funds, citing underperformance and weak returns.
Massive ESG Fund Outflows in the U.S.
📉 In Q4 2024 alone, U.S. investors withdrew a net $4.3 billion from ESG funds.
📉 Over the past two years, ESG fund outflows have accelerated as investors prioritize profitability over politics.
Meanwhile, European investors continue to double down on green investments, despite mounting losses. This may explain why the European stock market has significantly underperformed compared to U.S. stocks in recent years.
Why ESG Funds Are Losing Popularity
🔻 Underwhelming Returns – ESG funds have consistently underperformed compared to traditional investment options.
🔻 Political & Regulatory Pushback – Many states and policymakers have criticized ESG as politicized investing that prioritizes ideology over financial returns.
🔻 Investor Shift to Value & Growth Stocks – With rising interest rates and economic uncertainty, investors are seeking strong financial fundamentals, not corporate virtue signaling.
We Saw This Coming: ESG Investing Was Destined to Fail
Two years ago, our landmark study warned investment firms about the dangers of ESG investing. The data is now proving us right: Going green often means going deep into the red.
The Bottom Line: Investors Want Profits, Not Politics
With ESG funds losing favor in the U.S., the future of sustainability-focused investing is uncertain. As more investors demand higher returns over ideological investing, the shift away from ESG could accelerate even further.
💬 What do you think? Is ESG investing dead? Or will it make a comeback? Drop your thoughts in the comments below!
Take the Wall Street Walking Tour https://www.facebook.com/unofficialwallstreet
#WallStreetTours,#FinancialDistrictExploration, #ExploreWallStreet, #FinancialHistoryTour, #StockMarketExperience, #FinancialDistrictDiscovery, #NYCFinanceTour,#WallStreetAdventure
Wait. What??
I’ve been told for the last 4+ years that ESG funds OUTPERFORM non-ESG funds
Did they LIE to me ???????
Yes