The Environmental, Social, and Governance investment movement, once hailed as capitalism’s moral compass, now faces existential reckoning. It’s been a rollercoaster ride over the past few years. Global sustainable fund assets hit a record $3.2 trillion dollars in 2024, growing 8% from the previous year. However, the sector remains paralysed by greenwashing scandals, regulatory whiplash, and a stark underperformance that has investors fleeing.Morningstar data reveals a paradox. The fourth quarter of 2024 saw ESG fund flows rebound to $16 billion globally from $9.2 billion in the previous quarter. This masks a five-quarter streak of net outflows in Europe’s “darkest green” or “Article 9” funds and a $4.3 billion exodus from US strategies during the same quarter. The dissonance between ESG’s aspirational rhetoric and its financial reality can no longer be ignored.
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