ESG seems to be getting battered by all sides. Not only do ESG funds have to deal with regulators bearing down on their messaging and politicians questioning their purpose, but performance has also been an issue, especially this year. According to a new Bloomberg article, the 10 largest ESG funds by assets have all posted double-digit losses, with eight of them underperforming the S&P 500. This includes the iShares ESG Aware MSCI USA ETF (ESGU) which has $20.7 billion in assets and the Vanguard ESG US Stock ETF (ESGV) which currently has $5.9 billion in AUM. The worst performer so far has been the Brown Advisory Sustainable Growth fund (BAFWX) which was down 28.1% year to date as of Dec 5th. Poor performance in BAFWX can be attributed to a chunk of the portfolio being in software, semiconductor, and internet stocks, which have been hit hard this year due to rising interest rates, inflationary concerns, and the possibility of a recession. However, despite the bad performance, money continues to flow into ESG funds. A recent study by Harvard Business School professors found that investors are willing to accept lower returns in exchange for the societal benefits of ESG.

Finsum:Despite underperforming the S&P 500, large ESG funds continue to see inflow as investors are willing to accept lower returns in exchange for the benefits ESG provides society.