75bonuspoker| ESG fund clearing sweeps U.S. ETF market

The ESG-focused U.S. exchange-traded funds (ETFs) market is struggling.

Senior ESG analyst Shaheen Contractor said75bonuspokerSo far this year, at least 27 ETFs classified as compliant with Environmental, Social and Governance Principles (ESG) have been closed. By comparison, there were only 36 incidents in all of last year.

The prospects are not optimistic. Contractors say the trend is likely to continue, especially if strong Republican leadership opposition to the investment strategy heats up.

"Complex topics that are difficult to raise funds are at the greatest risk," she said.

Against the backdrop of increasing fund closures, only two ESG ETFs have been launched in the Americas this year, the fewest since tracking the data about five years ago. Contractors said the number of fund issues fell from a peak of 124 for the full year of 2021.

She said the industry is struggling because cash flow from ESG-focused portfolios has dropped sharply and the market has matured and most large asset managers have launched a number of such funds.

Contractors say actively managed ESG ETFs tend to charge higher fees and account for more than half of fund turnover this year. However, the analyst said actively operating funds provide "a more flexible strategy, which may become increasingly important as asset managers try to stand out in an increasingly competitive market."

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