Sustainable Investing Faces Major Pullback

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In the U.S., sustainable funds saw record outflows from the asset class in 2024.

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The outflows coincide with major fund managers leaving environmentally focused groups and reducing the number of ESG resolutions they back within their sustainable funds.

• BlackRock, State Street, and Vanguard backed 12%, 22%, and 0% of key ESG resolutions, respectively, in 2024, per Morningstar

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The above data is surprising since it contradicts individual investor sentiment from Morgan Stanley’s Sustainable Signals report. In January 2024, more than half of investors said they planned to increase sustainable investments in the next 12 months.

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So, while individual investors are still signaling their interest in making sustainable investments, fund managers are scaling back their ESG commitments, citing fiduciary responsibilities amid growing political scrutiny.

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The heyday of U.S. sustainable investing is over.