UK Investors Pull £544 Million from ESG Funds, Marking Highest Outflow on Record

In a surprising turn of events, UK investors withdrew a staggering £544 million ($673 million) from environmental, social, and governance (ESG) funds in September, representing the highest outflow ever recorded. This trend indicates a growing disinterest in responsible investing among stakeholders who now prefer ventures that offer greater stability. Over the course of the month, UK savers removed a total of £1.4 billion from various investment funds, with almost half of this sum originating from ESG-based vehicles.

The decline in responsible investment funds has been a persistent trend throughout this year. At the end of September, the Investment Association reported that funds under management dropped to £95 billion, down from the previous month's figure of £95.9 billion. This decrease is particularly troubling for those invested in ESG, as it signifies a loss of confidence in these assets.

While responsible investing faltered in September, other investment opportunities experienced more favorable results. UK gilts attracted net retail sales of £237 million, indicating a significant interest among investors. Additionally, corporate bonds saw net retail sales of £209 million, showcasing a preference for these types of financial instruments.

The significant departure from ESG has not gone unnoticed, as influential players in the investment industry, such as BlackRock and Vanguard, have been actively reducing their support for ESG proposals during proxy season. Vanguard, renowned for its $8 trillion assets under management, backed only 2% of ESG-based proposals this year, compared to 12% in 2022. The organization claims that the decline in support can be attributed to the characteristics of the shareholder proposals, stressing the importance of assessing each case individually and considering the specific circumstances of the company involved.

Although £1.2 billion was invested in funds between July 1 and September 30, this figure pales in comparison to the first quarter of the year, which witnessed nearly £4 billion being allocated to various funds. Despite this decline, UK gilts remained a favored investment throughout the period of uncertainty, emerging as the best-selling sector in September. Another positive note in an otherwise challenging month was the increased inflow of funds into mixed-asset investments.

In conclusion, the pullback from ESG funds has been consistent this year, reaching its peak with UK investors withdrawing £544 million in September. This movement reflects a broader disinterest in responsible investing as stakeholders shift their focus towards more resilient ventures. Nevertheless, other investment avenues such as UK gilts and corporate bonds have managed to capture investor attention during this time of market volatility.

UK Investors Pull £544 Million from ESG Funds, Marking Highest Outflow on Record

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