The Blubber

BlackRock, State Street among money managers closing ESG funds, per Bloomberg.


BlackRock Inc. and other asset management firms have dedicated years to launching sustainable investment funds, aiming to tap into the growing interest in ESG (Environmental, Social, and Governance) investing. However, they are now discontinuing a growing number of these products in the United States due to political pushback and heightened scrutiny from investors.

Companies such as State Street Corp., Columbia Threadneedle Investments, Janus Henderson Group Plc, and Hartford Funds Management Group Inc., among others, have dissolved over two dozen ESG funds this year, according to data from Morningstar Inc.

On September 15, BlackRock informed regulators of its intention to close two sustainable emerging-market bond funds, with a combined total of approximately $55 million in assets.

While the United States had 656 sustainable funds as of June 30, according to Morningstar data, the number of fund closures is rising compared to previous years. The data reveals that more U.S. sustainable funds have ceased operations in 2023 than in the past three years combined, with investors withdrawing more money from these funds in the first half of the year than they invested.

Alyssa Stankiewicz, Associate Director for Sustainability Research at Morningstar, noted, "We have definitely seen demand drop off in 2022 and 2023."

These fund closures highlight the evolving landscape of sustainable investing, marked by disappointing returns for investors and ongoing criticism of ESG strategies. Some sustainable funds faced challenges last year due to their focus on growth strategies that did not perform well in 2022, while others struggled to attract investor capital, as explained by Stankiewicz.