Global backlash drives worst ESG fund redemptions on record
THE global market for sustainable funds just suffered its worst quarter on record, with redemptions reaching an all-time high, according to a fresh analysis by Morningstar.
Against a backdrop of 'geopolitical uncertainty and a growing backlash against ESG,' investors withdrew an estimated US$8.6 billion in the first quarter of 2025, Morningstar said last week. The development marks a 'stark reversal' from the US$18.1 billion in inflows in the final quarter of 2024, it said.
Even in Europe, which is by far the world's biggest market for investments targeting environmental, social and governance goals, ESG (environmental, social and governance) funds saw net outflows, with redemptions of US$1.2 billion.
The first-quarter withdrawals mark the first time European ESG funds have lost money since Morningstar started monitoring the market in 2018.
Overall, the ESG fund market is struggling to find its footing amid an 'increasingly complex geopolitical environment' triggered by US President Donald Trump's return to office, the researcher said.
'The quarter signals a shift, not just in flows, but in how sustainable investment strategies are being perceived and positioned in the market,' Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics, said in an e-mail accompanying the report.
A NEWSLETTER FOR YOU
Friday, 12.30 pm ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Sign Up
Sign Up
'We're seeing further signs of consolidation, rebranding activity, and cautious product development, amid an intensifying ESG backlash in the US which is now also noticeably affecting sentiment in Europe,' Bioy said. 'Investor appetite for ESG funds will continue to be tested in the months ahead by an evolving regulatory landscape and mounting geopolitical tensions.'
Asset managers based in the US are increasingly toning down references to ESG in response to Trump's attacks on climate-change initiatives and due to legal risks following his executive order targeting DEI (diversity, equity and inclusion), Morningstar said.
The development has led some European investors to question US asset managers' commitment to climate and sustainability goals.
Meanwhile, market regulators in Europe have been cracking down on inflated ESG claims with new investment requirements being put in place in both the EU and the UK.
The offering of new ESG funds continued to slide in the quarter, with a record low of 54 new funds launched worldwide, Morningstar said. Meanwhile, the number of funds dropping ESG-related terms from their names roughly doubled, to 116. A further 114 were either liquidated or merged, with US fund closures hitting a record high of 20.
'Funds that struggle to attract assets or deliver good returns are increasingly prone to closing down,' Morningstar said in its report. 'We view this as a natural evolution of the industry.'
Canada, Australia and New Zealand marked a rare bright spot, with each seeing inflows of around US$300 million, Morningstar said. The global ESG fund market had assets worth US$3.2 trillion in the first quarter, it said. BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
2 hours ago
- CNA
Iran to present counter-proposal to US, Trump says talks to resume
WASHINGTON: Iran said on Monday (Jun 9) it will soon hand a counter-proposal for a nuclear deal to the United States in response to a US offer that Tehran deems "unacceptable", while US President Donald Trump said talks would continue. Trump made clear that the two sides remained at odds over whether the country would be allowed to continue enriching uranium on Iranian soil. "They're just asking for things that you can't do. They don't want to give up what they have to give up," Trump told reporters at the White House. "They seek enrichment. We can't have enrichment." Earlier, Iranian foreign ministry spokesperson Esmaeil Baghaei said Tehran was preparing a counter-offer to the US proposal that was presented in late May. He said there was no detail about the timing of a sixth round of talks. While Trump said the next round of talks would take place on Thursday, a senior Iranian official and a US official said Thursday was unlikely. Following Trump's remarks, Baghaei said "based on recent consultations, the next round of Iran–US indirect negotiations is being planned for next Sunday in Muscat", according to the ministry's Telegram channel. The US official said the talks, led by US special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi, could be on Friday or Sunday, possibly in Oman or Oslo. "The US proposal is not acceptable to us. It was not the result of previous rounds of negotiations. We will present our own proposal to the other side via Oman after it is finalised. This proposal is reasonable, logical, and balanced," Baghaei said. "We must ensure before the lifting of sanctions that Iran will effectively benefit economically and that its banking and trade relations with other countries will return to normal." Reuters previously reported that Tehran was drafting a negative response to the US proposal. An Iranian diplomat said the US offer failed to resolve differences over uranium enrichment on Iranian soil, the shipment abroad of Iran's entire stockpile of highly enriched uranium and reliable steps to lift US sanctions. Last week, Supreme Leader Ayatollah Ali Khamenei dismissed the US proposal as against Iran's interests, pledging to continue enrichment on Iranian soil, which Western powers view as a potential pathway to building nuclear weapons. Iran says its nuclear programme is only for peaceful purposes. Trump said Iran was the main topic of a phone conversation he had on Monday with Israeli Prime Minister Benjamin Netanyahu. Netanyahu's office said the president had told him talks with Iran would continue at the end of the week. During his first term in 2018, Trump ditched a 2015 nuclear pact between Iran and six powers and reimposed sanctions that have crippled Iran's economy. Iran responded by escalating enrichment far beyond that pact's limits. Iran says the West has turned a blind eye to Israel's nuclear programme even while pushing against Iran's. Israel neither confirms nor denies that it has nuclear weapons. Baghaei said sensitive Israeli documents, which Iran has previously promised to unveil, would demonstrate "that parties constantly questioning Iran's peaceful nuclear programme actively work to strengthen Israel's military nuclear programme".
Straits Times
2 hours ago
- Straits Times
DBS tops US$100 billion market value in Singapore Exchange first
South-east Asia's top lender closed 0.8 per cent higher at $45.49 in Singapore trading on June 9, giving it a market capitalisation of $129.36 billion. ST PHOTO: LIM YAOHUI SINGAPORE – DBS Group Holdings became the first listed company in Singapore to top US$100 billion (S$128.6 billion) in market value, helped by a weaker US dollar that amplified gains on the local stock market. South-east Asia's top lender closed 0.8 per cent higher at $45.49 in Singapore trading on June 9, giving it a market capitalisation of $129.36 billion (US$100.6 billion), extending its gains this year to more than 4 per cent. The advance in DBS's share price in US-dollar terms was driven by the weaker greenback. So far this year, the Singapore dollar has appreciated about 6 per cent against the US dollar. In local currency terms, DBS has eased slightly from its record closing high of $46.67 on Feb 26. At the current market value, DBS ranks about 22nd among global banks, according to data compiled by Bloomberg. That's ahead of Tokyo-based Sumitomo Mitsui Financial Group, but half that of HSBC Holdings. Some of Asia's biggest banks like Commonwealth Bank of Australia and India's HDFC Bank have bigger market capitalisations. The milestone comes after Singapore banks pledged in recent months to hand over billions of dollars in surplus capital to investors, encouraged by record-high earnings in 2024. DBS in particular, has benefited from increases in lending and wealth fees. Other than DBS, Singapore-based Sea that is listed in New York reached this valuation before. DBS chief executive officer Tan Su Shan took charge of the bank in March from Piyush Gupta after his 15-year leadership. Ms Tan said at her first earnings call in May that the bank seeks to benefit from supply-chain changes undertaken by its clients and increased demand for hedging foreign exchange exposure amid US President Donald Trump's tariff moves. 'A lot of DBS's out-performance has been due to the larger growth of its wealth management, which is really starting to challenge top players in Asia,' said Michael Makdad, a senior analyst at Morningstar, adding he sees the business continuing to grow. 'Despite Trump's tariffs, the environment remains relatively benign for Singapore banks which are increasing share dividends and buybacks more than we would've expected a year ago.' DBS is the third-largest wealth manager in Asia, excluding mainland China, according to data compiled by industry publication Asian Private Banker. Net new money for its business catering to the rich came in at $21 billion last year, demonstrating the strong inflows that have exceeded $20 billion for the past three years through 2024. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
2 hours ago
- Straits Times
The White House wants 90 trade deals in 90 days, may have 1 so far
US President Donald Trump has so far announced only one deal: a pack with Britain, which is not one of America's biggest trading partners. PHOTO: REUTERS The White House wants 90 trade deals in 90 days, may have 1 so far WASHINGTON - President Donald Trump has announced wave after wave of tariffs since taking office in January, part of a sweeping effort that he has argued would secure better trade terms with other countries. 'It's called negotiation,' he recently said. In April, administration officials vowed to sign trade deals with as many as 90 countries in 90 days. The ambitious target came after Mr Trump announced, and then rolled back a portion of, steep tariffs that in some cases meant import taxes cost more than the wholesale price of a good itself. The 90-day goal, however, is one-tenth of the time it usually takes to reach a trade deal, according to a New York Times analysis of major agreements with the United States currently in effect, raising questions about how realistic the administration's target may be. It typically takes 917 days, or roughly two and a half years, for a trade deal to go from initial talks to the president's desk for signature, the analysis shows. Roughly 60 days into the current process, Mr Trump has so far announced only one deal: a pact with Britain, which is not one of America's biggest trading partners. He has also suggested that negotiations with China have been rocky. 'I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!' Mr Trump wrote on Truth Social on June 4. China and the United States agreed last month to temporarily slash tariffs on each other's imports in a gesture of goodwill to continue talks. Part of what the president can accomplish boils down to what you can call a deal. The pact with Britain is less of a deal than it is a framework for talking about a deal, said Ms Wendy Cutler, the vice-president of the Asia Society Policy Institute and a former US trade negotiator. What was officially released by the two nations more closely resembled talking points for 'what you were going to negotiate versus the actual commitment', she said. During his first term, Mr Trump secured two major trade agreements, both signed in January 2020. One was the United States-Mexico-Canada Agreement (USMCA) which was a reworking of the North American free trade treaty from the 1990s that had helped transform the economies of the three nations. USMCA is an all-encompassing, legally binding agreement that resulted from a lengthy and formal process, according to trade analysts. Such deals are supposed to cover all aspects of trade between the respective nations and are negotiated under specific guidelines for congressional consultation. Closing the deal involves both negotiation and ratification – modifying or making laws in each partner country. The deals are signed by trade negotiators before the president signs the legislation that puts the deals into effect for the United States. Mr Trump's other major agreement in his first term was with China, in an echo of the current trade war. The pact, unlike previous deals, came about after Mr Trump threatened tariffs on certain Chinese imports. This 'tariff first, talk later' approach, said Ms Inu Manak, a trade policy fellow at the Council on Foreign Relations, is part of the same playbook the administration is currently using. The result was a nonbinding agreement between the two countries, known as 'Phase One,' that did not require approval from Congress and that could be ended by either party at any time. Still, it took almost one year and nine months to complete. China ultimately fell far short of the commitments it made to purchase American goods under the agreement. A comparison of the two first-term Trump deals shows the drawn-out and sometimes winding path each took to completion. Fragile truces (including ones made for 90 days) were formed, only for talks to break down later, all while rounds of tariffs injected uncertainty into the diplomatic relations between countries. The Times analysis used the date from the start of negotiations to the date when the president signed to determine the length of deal making for each major agreement dating back to 1985 that's currently in effect. The median time it took to get to the president's signature was just over 900 days. A separate analysis published in 2016 by the Peterson Institute for International Economics used the date of signature by country representatives as the completion moment and found that the median deal took more than 570 days. With roughly one month before the administration's self-imposed deadline, Mr Trump's ability to forge deals has been thrust into sudden doubt. Last week, a US trade court ruled he had overstepped his authority in imposing the April tariffs. For now, the tariffs remain in place, following a temporary stay from a federal appeals court. But in arguing its case, the federal government initially said that the ruling could upset negotiations with other nations and undercut the president's leverage. 'I think when the administration first started, they thought they could actually do these binding and enforceable deals within 90 days and then quickly realised that they bit off more than they could chew,' Ms Cutler said. The administration told its negotiating partners to submit offers of trade concessions they were willing to make by June 4, in an effort to strike trade deals in the coming weeks. The deadline was earlier reported by Reuters. The current approach to deal making may be strategic, Ms Manak said. One of the benefits of not doing a comprehensive deal like USMCA is that the administration can declare small 'victories' on a much faster timeline, she said. 'It means that trade agreements simply are just not what they used to be,' she added. 'And you can't really guarantee that whatever the US promises is actually going to be upheld in the long run.' NYTIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
