United States: Bear market puts ESG investing to its first big test

Investing based on environmental, social, and corporate governance (ESG) principles became a $35 trillion industry on the back of a long run-up in stocks that lasted from 2009 until the start of this year.

Investors now have to decide whether they will stick with it when making money is no longer easy.

The onset of a bear market this year, driven by rising interest rates and concerns over a potential recession, is testing investors’ ESG commitments. U.S. sustainable funds recorded a rare monthly outflow of $3.5 billion in May, according to Morningstar.

Even before then, inflows to these funds had slowed. They took in $7.5 billion in the first five months of this year, compared to $35 billion in the prior period.

Nevertheless, Alyssa Stankiewicz, Morningstar’s associate director of sustainability research, said outflows from ESG funds would have to be sustained for the weak demand to be more than a “hiccup.”

This article was originally published on reuters.com

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