Bank of America analysts noted a decline in Environmental, Social, and Governance (ESG) investing after a strong run from 2016-2021. The surge was driven by global regulations, increased investor demand, and corporate ESG commitments. However, since 2021, ESG fund assets in the US have dropped from $17 trillion in 2020 to $8 trillion in 2022, with outflows continuing in 2024. The decline is attributed to regulatory challenges, greenwashing accusations, energy security concerns, and US political resistance.
Despite the slowdown, ESG remains significant due to regulatory requirements and the influence of European regulations on US firms. The ESG data market remains fragmented, dominated by MSCI, Sustainalytics, and ISS, alongside numerous niche players.
