The first 100 days of the Trump administration were challenging for equity ETFs, with ESG exchange-traded funds particularly taking a hit. Investors withdrew a net $623.9 billion from the 10 largest ESG funds in the three months following Trump’s inauguration on January 20.
The largest ESG fund, the $12.5 billion iShares ESG Aware MSCI USA ETF (ESGU), saw outflows of $420.1 million during this period. The fund, managed by BlackRock, experienced an 8.7% decline, slightly underperforming the firm’s flagship S&P 500 fund, the iShares Core S&P 500 ETF (IVV).
President Trump’s administration’s focus on cutting government spending on programs supporting environmental, social, and governance causes, along with the promotion of fossil fuels, led investors to move away from ESG funds, which had previously gained popularity for offering opportunities to invest in socially and environmentally responsible companies.
The ESG investing theme faced criticism from conservative politicians and state officials, resulting in some states, such as Texas, Florida, West Virginia, Kentucky, and Oklahoma, prohibiting government pension funds from investing in ESG funds.
Despite the challenges faced by ESG funds, some top funds, such as the Vanguard ESG U.S. Stock ETF (ESGV), managed to attract small inflows in the wake of Trump’s policies. However, these positive flows were outweighed by significant outflows from funds like the iShares MSCI USA ESG Select ETF (SUSA) and the iShares MSCI KLD 400 Social ETF (DSI).
Kent Thune, CFP and etf.com senior research analyst, noted that the Trump administration’s lack of support for diversity, equity, and inclusion initiatives has negatively impacted the ESG investing theme. While socially responsible investing may not be at its peak, it is unlikely to return to previous levels of popularity.
Overall, the ESG ETF landscape has faced challenges during Trump’s first 100 days in office, with some funds experiencing significant outflows and regulatory hurdles. Despite these obstacles, ESG investing continues to be a relevant and important aspect of the investment landscape.
