Funds Aimed at ESG Skeptics

A new crop of ETFs seeks to offer an alternative to investments that focus on environmental, social and corporate governance issues. 

- KIM CLARK AND ELLEN KENNEDY 

There's a new wrinkle in the growing controversies over the rise of investment funds that promise to address environmental, social or corporate governance concerns. Amid investigations into allegations of "greenwashing," or false promises of environmental improvements, and opposition to ESG measures from conservative political leaders, individual investors are gaining new opportunities to direct their money to funds pitched as contrarian responses to the ESG trend.

At least nine new exchange-traded funds-some signaling their purpose with symbols such as DRLL-launched last year in reaction either to ESG issues specifically or to what some of the new fund founders label as a liberal political agenda behind ESG. In their short history, the 2022 crop of funds has cumulatively gathered more than a half-billion dollars in investments, though that is dwarfed by the more than $101 billion in assets currently invested in 279 U.S. ESG ETFs. In 2022 alone, investors put over $5 billion more into ESG ETFs than they took out, according to CFRA.

The nine funds making their debut last year are often lumped with a handful of others introduced since 2017 that promise to advance conservative political issues. Aniket Ullal, head of ETF data and analytics at CFRA, expects more political debates within the investment world. "Political intervention in ETFs is going to be an important story this year," he says. Some state financial officials are already threatening to pull money from managers they charge are improperly using investments to further political agendas, and the new Republican leaders of the House of Representatives threaten investigations into ESG investing.