The iShares ESG Aware MSCI USA ETF (ESGU) experienced a significant outflow of $3.9bn in just one day at the beginning of last week. The fund’s assets under management dropped from $14.4bn to $10.5bn on March 20. In contrast, on the same day, the iShares MSCI USA Quality Factor ETF (QUAL) saw net inflows of $4.8bn, pushing its assets to $25bn by March 21.
The ESGU ETF’s outflows are a departure from its recent trend, as the fund had recorded $1.6bn in net outflows for the year ending February 28, according to Morningstar Direct data. The sell-off highlights the volatility and uncertainty surrounding ESG-focused investments, particularly during periods of market turbulence.
ESG investing has gained popularity in recent years, with investors looking to align their values with their portfolios. However, the lack of standardisation in ESG data and the subjective nature of ESG criteria have led to concerns about greenwashing and misaligned incentives. The recent outflows from the ESGU ETF could signal a shift in investor sentiment towards more traditional investment strategies.