Investors flee ESG funds amid market volatility
Funds focusing on ESG investments saw an exodus last month as global market turbulence led investors to seek steadier ground in financial stocks, new data has revealed.
Data from investment platform Hargreaves Lansdown showed net flows into ESG funds plunged 115 per cent in January compared to the year prior, marking the first month of negative net flows into ESG funds since March 2020.
Emma Wall, head of investment analysis and research at Hargreaves Lansdown said fears of a Fed rate rise in the US had spurred market churn and left investors seeking safer ground.
“The Nasdaq index of US tech stocks recorded its worst month since the pandemic slump in March 2020, as investors took gains and instead sought out stocks such as financials, which tend to benefit from higher interest rates,” she said.
“ESG funds were caught up in the style rotation as the appeal of growth-orientated names waned.
Wall warned that the plunge was not the death knell of sustainable investing however and suffered from comparison to what was a record breaking month in January 2021.
She added: “Last month was also a choppy month for fund flows across all sectors, as investors sought to make sense of the higher-rate outlook.”
Data from investment body the Investment Association also shows that retail investors allocate more to responsible funds throughout the year.