In an article for CNNBusiness, Nicole Goodkind discussed some reasons why the ESG trend may have peaked and examines if it this is a positive development. 

In Q1, total assets under management of ESG funds declined by $163 billion. And, this trend has continued in Q2. This is despite ESG funds modestly outperforming the broader market. 

A major factor is that inflows into energy stocks picked up following the war between Russia and Ukraine. Another is that ESG investing is becoming a political issue with many conservative states looking to ban use of ESG considerations in investment decisions by state-run funds. 

According to Robert Jenkins, the head of global research at Lipper, ESG investing as a seperate entity will likely be phased out. Instead, ESG ratings will simply be another metric to evaluate investments. 

He sees ESG investing evolving into a more mature phase. This phase will be less hype-driven and politically contentious. Instead, the focus will be on standardazing data and ratings so that investors can make better decisions. Overall, it could certainly be positive as it would dissuade companies from ‘greenwashing’ to game ESG ratings, while still allowing investors to include these factors in their decision-making process. 

Finsum: ESG investing may have peaked in terms of popularity especially as it’s become a political target. However, the trend may be moving into a more mature phase.