Investors bolted from responsible investment funds in record numbers over the summer as the ESG frenzy that gripped the market for the past five year begins to run out of steam, according to new figures.
Some £448m was pulled by retail investors from environment, social and governance (ESG) funds in August, the third consecutive month of outflows, in a sign that responsible funds may be losing their pull, according to new data from the Investment Association.
The flows paint a troubling picture for the state of ESG investing after years in which investors scrambled to pump cash into responsible investment strategies.
Analysts at retail investment firm AJ Bell said “it feels like the ESG party is running out of steam” as investment flows dry up and go into reverse.
“We’ve now had three months of continuous outflows, and in August a record amount was withdrawn from responsible investment funds,” said Laith Khalaf, head of investment analysis at AJ Bell.
“Part of the explanation for the ESG slowdown is likely to be the cyclical nature of fund flows. Three years ago ESG was everywhere, fund groups were launching new products and marketing them like crazy, and the saturation point was probably found pretty quickly.”
Bumper cash flowing into ESG funds helped keep them buoyant over the past years and helped attract more cash from investors, Khalaf added, but after the initial “goldrush” they were having to fight hard for cash like all other sectors.
The new numbers come after a separate survey of investor moods this week found that just one per cent of investors said ESG was a top concern when making investment decisions.
Just over half of professional investors surveyed by comms agency MHP said ESG was an “important factor” when making decisions while 16 per cent wrote it off entirely when weighing up where to put their money.
Among amateur retail investors, some 45 per cent said it was not an important factor when decision making.