ESG was supposed to be the future of smart investing, but the future looks increasingly politically incorrect, according to a new Axios report on the “exodus” of money from “sustainable investment funds.”
To put it bluntly, ESG was meant to be a money bludgeon for beating corporations into toeing the Progressive line. Maybe best exemplified by the BlackRock investment firm, the smart money would flow to firms with the best “green energy” records, the most left-wing public relations (and donations, natch), and the most buttinsky DEI (DIE?) departments.
And the money did rush in. Until now. Because there’s an inevitable response when the returns fail to materialize: investors bail. Last quarter, sustainable investment funds (including EFTs) “saw $8.8 billion in net outflows, per new data from Morningstar.” The outflow was the biggest ever and is just the latest in a negative trendline that began a year ago.
“When interest rates rise, that makes the future less valuable compared to the present,” was the Axios left-wing spin — before they spun so hard they must have damaged the office furniture: “That’s bad news for ESG investments, which broadly seek to bet on a brighter, greener future rather than on next quarter’s cash flows.”
The real indicator is how “sustainable” funds performed when compared to the broader markets, which are generally up despite having the same high interest-rate headwinds.
Axios can spin until they throw up, but that doesn’t change the numbers.
Last quarter’s massive disinvestment from “sustainable” funds came despite Washington putting its big, fat thumb on the scale in their favor.
There was the ill-named Inflation Reduction Act, which in reality was the Green New Deal Lite. The 2022 law did nothing to combat inflation, as the administration later admitted, but earmarked more than two-thirds of its $1.2 trillion cost on various green energy boondoggles. As I wrote earlier this week, the law is Biden’s trillion-dollar foray into ’80s Japanese-style industrial policy. “Japan enjoyed a ‘lost decade‘ after that house of cards came crashing down,” I reminded you then, “and nothing much better in the 20 years since.”
Remember Solyndra? That was a drop in the failure bucket compared to what might be coming from the Biden administration.
The other was the just-as-ill-named Infrastructure Investment and Jobs Act from 2021. Another $1.2 trillion boondoggle, it spent just 9 cents per dollar on actual infrastructure. If it created any decent jobs in the private sector, they certainly weren’t full-time.
But investors don’t care about any of that; they care about generating returns. The Green New Deal Lite’s efforts to spark our “transition to a clean energy economy” haven’t accomplished much except for higher energy prices. Even the market for heavily subsidized electric vehicles appears to be plateauing much sooner and lower than expected.
ASIDE: “Transition to blah-or-blah” is Biden’s version of Barack Obama’s “fundamental transformation.”
Maybe the money will come pouring back in as Washington and various state governments continue to subsidize and mandate the ever-loving heck out of “clean” energy boondoggles and EVs. But at least for now, the smart money is going elsewhere.
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