Investors have pulled out of environmental, social, and corporate governance funds because of poor performance, the Financial Times reported Wednesday.
Close to $40 billion has been withdrawn from ESG funds this year because of poor performance, the outlet reported. This despite the funds receiving heavy backing from finance and industry titans, according to Unlimited Hangout, as well as support from the U.S. government in the "Inflation Reduction Act" and its emphasis on green energy.
"ESG was a dotcom sort of hype 20 years later and now it has passed," Pierre-Yves Gauthier, head of strategy at the research company AlphaValue, told the Times.
Moreover, House Republicans have subpoenaed BlackRock and State Street as part of an investigation into the financial sector over claims they are violating antitrust laws.
Last year, BlackRock CEO Larry Fink said, according to the Times, that he doesn't use "ESG" anymore because the term has been "entirely weaponized."
Nonetheless, Todd Cort, a professor at the Yale School of Management who works in sustainable investing, told the Times even though the term has fallen out of favor, the underlying social and environmental challenges remain.
"Behind the curtain," Cort said, "there will be substantially more effort by investors to understand environmental and social risks. That will continue to grow, and I actually don't care too much if we continue to call it ESG."