Investors are switching sustainability for profitability as ESG funds saw record-breaking outflows last month.
Some £304mln moved from ESG funds in May, only the second time in five years that investors were net sellers, data from Calastone, found.
“One bad month is far too soon to call the start of a new trend of outflows from the sector, but the ESG boom has been cooling for several months now,” said Edward Glyn, head of global markets at the London group.
Last year, 2022 was the first year in over a decade to have seen more outflows than inflows in ESG assets.
High gilt yields, a by-product of heightened inflation, have seen investors switch strategies away from sustainable-focused funds.
Stocks also dropped in May on the back of these high-returning bonds, according to reports from The Telegraph.
Investors switching to the irresistibly high returns of oil and gas companies will have also dampened the interest in ESG funds, as they are required to exclude these stocks.
The ESGU ETF, one of the world’s largest eco funds, is down by around 9% in the last twelve months.