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Investing

As ESG backlash grows, investor flight to quality creates problems for fund firms

Photo of Trey Thoelcke
By Trey Thoelcke Updated Published
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As ESG backlash grows, investor flight to quality creates problems for fund firms

© agafapaperiapunta / iStock Editorial via Getty Images

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Investment fund firms in Europe have a problem, and U.S. funds and venture capitalists should pay attention.

Amid a rash of greenwashing regulations and recent lawsuits against financial firms for portraying their products as greener than they might be, firms have been ratcheting back the number of funds they claim are environmentally, social and governance (ESG) fit.

But that hasn’t reduced demand. In fact, it’s created a bit of a squeeze as demand for the highest quality ESG funds rises even as the number of funds are falling, according to the latest inflow numbers from Bloomberg.

Combine this with an emerging trend in venture capital toward environmental and renewable companies with hardcore strategies to fix something (as opposed to, say, cryptocurrency) and you have the makings of a new potential run in ESG investment as the overall stock market finally starts to respond to Fed rate hikes.

Forget all the vitriol about ‘woke’ capitalism and anti-ESG hearings in Washington, investors vote with their money. And right now, that money is looking for sustainable opportunity.

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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