2023 was a tough year for US sustainable funds: Morningstar report
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The year 2023 was “the worst calendar year on record” for US sustainable funds, according to a new report by Morningstar. Investors pulled $5 billion from the funds in the fourth quarter for a total of $13 billion last year. The ongoing political scrutiny in the US and the challenges specific funds face also contributed to this trend.
Investors ended the year by pulling $5 billion from U.S. sustainable funds, making 2023 their worst calendar year on record.
— Morningstar, Inc. (@MorningstarInc) January 20, 2024
See below for a full flow recap, plus a sneak preview of our annual sustainable funds landscape. https://t.co/A3nxaAeUGO
The report noted that equity funds underperformed the most, with 32% of sustainable equity funds ranking in the bottom quartile compared to their peers.
Actively managed sustainable funds shed $4.6 billion during the fourth quarter, which accounted for roughly 90% of net withdrawals from all sustainable funds. Although the performance of sustainable equity funds improved compared to 2022, there were concerns regarding greenwashing.
Also read: Study reveals decline in sustainable fund investments due to greenwashing surge
“Assets in sustainable funds climbed to $323 billion at the end of 2023. This represents a nearly 12% decline from the record at the end of 2021 but an 18% increase from the recent low in 2022’s third quarter. By comparison, assets in the broader US funds landscape also peaked at the end of 2021 and slid by 5% through to the end of 2023,” notes the report.
The report lists the worst-performing companies and the new funds of the year. Despite setbacks, the total number of sustainable funds in the US reached 647 by the end of 2023.
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