Finance
The ESG Crown Is Slipping, and It’s Mostly the Fund Industry’s Own Fault
Plain-vanilla stock and bond funds are doing better than the socially responsible ones.
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In late 2021, Cathie Wood’s ARK Investment Management introduced its first exchange-traded fund with a socially conscious bent. Less than eight months later, the ARK Transparency ETF was shuttered—the firm’s first-ever closure—and Wood declared on Bloomberg Television that “there was a lot of slapping lipstick on a pig” in the environmental, social, and governance investment industry.
ARK’s experience is part of a broader ESG reckoning. After two years in which more than $32 billion flowed into US exchange-traded funds with an ESG focus, investors have put only about $4.5 billion into such ETFs in 2022. Seven have closed, and US and European regulators are starting to crack down on claims made by fund creators.