Despite a barrage of Republican attacks, lacklustre returns and diminishing client interest in the US, BlackRock has been quietly expanding its dominance in ESG investing.
“BlackRock has been the biggest contributor of inflows into ESG funds over the past five years, including the past couple of years,” said Hortense Bioy, Morningstar’s global director of sustainability research. And that’s “despite the ESG backlash in the US.” To complicate the narrative for ESG’s proponents, the macroeconomic forces that have prevailed since the end of the pandemic, including high interest rates, have proved a poisonous cocktail for many of the green stocks that traditionally fill ESG portfolios. Last year, the S&P Global Clean Energy Index slumped 20%, while the S&P 500 rose 26%, including reinvested dividends.
The wider ESG fund market, meanwhile, suffered a stinging blow in the final three months of 2023 with the first-ever net client outflows. The retreat was led by the US, where redemptions were too big for European inflows to offset. ADVERTISEMENT CONTINUE READING BELOW As the global fund market lost $2.5 billion of ESG client cash last quarter, BlackRock had net inflows of $4.7 billion, led by its European business and index-tracking strategies, according to Morningstar. BlackRock saw $5.
Bioy said the latest flow figures show the “disappointing reality” that managers pushing active ESG strategies “failed” to prove to clients that they should be entrusted with their money, despite sitting in a “corner of the market where it’s easier for them to prove their worth.”