Investor Interest in Sustainable Funds Wanes as Concerns About Greenwashing and Political Backlash Rise
Published: 2023-10-23Money managers in the United States are closing more funds with sustainability mandates than they are opening, as investor interest in ethically responsible practices wanes. This comes as regulators scrutinize the marketing of these investment products and Republican politicians allege that industries are being boycotted to the detriment of retirees' savings. In the third quarter, thirteen sustainable funds closed while only three new ones were launched. Additionally, one existing fund adopted the “sustainable” label while four others moved away from that mandate. Sustainable funds have also experienced outflows for the fourth consecutive quarter.
Concerns about greenwashing and political backlash are contributing factors to the decline in investor appetite for sustainable investment products. Rising energy prices, high interest rates, and the need for greater supply chain transparency are also impacting the outflows. It is clear that investors are becoming more discerning and cautious about where they put their money.
However, there are initiatives and standards being developed to address these concerns. The Solar Sustainability Initiative (SSI) has launched a new standard to promote environmental, social, and governance sustainability in the solar PV industry. The standard covers aspects such as governance, environment, and human and labor rights. The SSI aims to drive market uptake and support the solar sector’s sustainability commitments.
In the agricultural sector, there is a need for a legal definition of regenerative agriculture at the EU level to avoid greenwashing concerns. The Sustainable Agriculture Initiative (SAI) has released a definition that focuses on protecting and improving soil health, biodiversity, climate, and water resources while supporting farming business development. Collaboration with farmers and other interest groups is crucial in developing a comprehensive definition.
In the IT sector, cloud providers and customers need to adopt sustainable practices to reduce their carbon footprint. This includes sourcing clean energy, utilizing specialized hardware for efficiency, and establishing GreenOps functions. Cloud sustainability goals should align with overall sustainability objectives, and a multi-faceted approach is needed.
Finally, impact investment management firms are coming together to discuss sustainability, racial equality, and climate and agriculture. The conference aims to find new ideas at the intersection of investing with climate change, food, and racial equality. The urgency to fight climate change and address historical challenges highlight the significant role impact investors can play in these conversations.
Overall, the landscape of greenwashing and sustainability is evolving, with investors and regulators becoming more vigilant. Initiatives and standards are being developed to address concerns and promote transparency. It is crucial for individuals and organizations to make informed choices and support initiatives that align with their values and contribute to a more sustainable future.
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