Wednesday, November 22, 2023

The Death of a Fad

Well … that didn’t take long to peak and die. 

In the early summer I wrote a brief spate of posts (here, here, and here) about environmental, social, and governance or ESG scores. I focused on the pernicious effect the “conscientious capitalism” movement was having on firms like Budweiser, Target and Disney.

Today Power Line quotes the Wall Street Journal’s epitaph for this unfortunate “virtue signaling luxury fad,” original behind WSJ paywall.
Wall Street rushed to embrace sustainable investing just a few years ago. Now it is quietly closing funds or scrubbing their names after disappointing returns that have investors cashing out billions.

The about-face comes after tightened regulatory oversight, higher interest rates that have slammed clean-energy stocks and a backlash that has made environmental, social and corporate-governance investing a political target.

The third quarter was the first time more sustainable funds liquidated or removed ESG criteria from their investment practices than were added, according to Morningstar. That is a reversal from not that long ago, when companies were rebranding faltering funds to cash in on the billions of dollars flowing into sustainable investment products.

Note classical allusion in my title above.