Investors have recently withdrawn significant amounts from ESG (environmental, social, and governance) funds, with nearly $20 billion pulled in 2024 alone, following a trend of $13 billion in 2023. This decline is attributed to a political backlash against ESG initiatives, rising interest rates, and general market conditions. Despite these challenges, analysts maintain that the long-term outlook for ESG investing remains favorable. Diana Iovanel from Capital Economics emphasizes that the demand for ESG investments is enduring, despite political pressures. While the number of ESG funds has decreased for the first time, the total assets in ESG funds grew slightly due to market appreciation. Younger investors show a strong interest in sustainable investing, with a Morgan Stanley survey indicating that 84% of individual investors are keen on ESG. However, high interest rates and recent performance issues, particularly in clean energy sectors, have posed additional challenges. Overall, ESG investing is positioned for resilience, even amidst current headwinds.
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