As presented in “Investors Pull $40 Billion From ESG Funds as Enthusiasm for Sustainable Stocks Subsides” (Report, June 6), the interpretation that sustainable investing is in retreat oversimplifies the trend and overlooks the larger shifts taking place in the real economy.
Fund flow data represents only the most liquid and least exposed segment of the sustainable investing world. After all, when investor money flows in and out of mutual funds or exchange-traded funds, no additional capital flows to the underlying companies. Therefore, fund flow data should be thought of as a sentiment indicator rather than an economic indicator.
A different story emerges when we look at primary markets, the capital that underpins the real economy. Several organizations, including the International Energy Agency, have reported that total investment in “green” industries such as renewable energy, electric transportation, and power grids has reached an all-time high. Meanwhile, climate-related technologies now make up more than 10% of total private market equity and grant investment, up from just 2% a decade ago, according to PwC data.
This investment is making a measurable, real-world difference: Electric vehicle sales are on track to grow by more than 30% in 2023, making it another record year, according to Bloomberg.
Global solar power installations surpassed 440 GW last year, more than double the figure for 2021. And in the social sector, the proportion of women among CEOs and board members of S&P 500 companies both increased by 1 percentage point in 2023, as measured by the Conference Board.
While the popularity of sustainable investment funds may wax and wane with shifts in political sentiment, the influential economic megatrend of sustainability continues to quietly continue.
James Purcell
Former Deputy Chief Sustainability Officer at Credit Suisse
Kirchberg, Switzerland
