Investor interest in environmental, social, and governance funds has waned as a result of the challenging economic and geopolitical environment, according to the latest FT Adviser poll for Talking Point.
Advisers were asked: "To what extent has the challenging economic and geopolitical environment impacted the interest investors have in ESG funds?"
The majority (83 per cent) said investor interest in ESG funds had waned, while 11 per cent said investors were increasingly more interested in ESG funds.
The remaining 6 per cent of advisers said investor interest had remained the same.
Underperformance of ESG funds have also impacted investor sentiment.
Daniel Wiltshire, actuary and IFA at Wiltshire Wealth, said: "Enthusiasm for ESG/sustainable funds has waned over the past couple of years, not least because many have underperformed the wider market.
"There was a time, in the heady days post-Covid, when you'd hear fund managers, many with vested interests, talking about an 'ESG premium'. At the time, ESG funds were performing strongly, largely due to their oversized allocation to US tech stocks.
"We have always been clear that, as we believe in broadly efficient markets, any constraints placed on a portfolio will lead to lower expected returns."
Wiltshire added that clients had also become increasingly cynical of the promises made by certain fund managers.
"Greenwashing has become a huge problem and the fund management industry, as a whole, has not been clear enough about the challenges of making a measurable, real world impact through secondary market investments," he said.
"That said, we are optimistic about the positive impact that improved stewardship and engagement can have over the longer term."
ima.jacksonobot@ft.com
