May 15 (Reuters) – U.S. sustainable funds posted net withdrawals of $300 million in April, researcher Morningstar Inc said in a report on Monday, continuing a pullback from the prior month.
The net withdrawals were less than the more than $5 billion investors took out of U.S. sustainable funds in March, but in line with a pattern of outflows that totaled $6.7 billion for the year through the end of April, the most of any fund category, Morningstar (MORN.O) said.
Even accounting for one fund’s outflow in March, U.S. sustainable flows have been “fairly weak since early 2022,” said Morningstar analyst Adam Sabban via e-mail. That’s somewhat surprising given that energy stocks that once offered a powerful draw away from sustainable funds have pulled back so far this year, he said.
The S&P 500 energy sector (.SPNY) for instance is down 10% so far this year, compared to an 8% gain for the S&P 500.(.SPX) Last year, higher energy prices boosted the shares of many oil and gas companies, putting pressure on funds using environmental, social or governance (ESG) criteria that avoided fossil fuel stocks.
In addition, U.S. Republican politicians, many from energy-producing states, have campaigned against the growing adoption of ESG considerations by executives and investors.
In all Morningstar said long-term U.S. mutual funds and ETFs had net deposits of roughly $6.5 billion in April, after posting outflows in March and February.
“Sentiment remains broadly weak,” Morningstar said in Monday’s report. The funds’ growth rate of 0.1% for the year through April was their third-worst for the same period since Morningstar began tracking the data in 1993.
According to Morningstar, much of the big outflow from sustainable funds in March was due to a reallocation within BlackRock’s model portfolio that shifted money from an ESG-focused ETF (ESGU.O) to a non-ESG ETF.
Reporting by Ross Kerber; Editing by Aurora Ellis
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