Despite a pullback amid political hostility, investors and business leaders still recognize that corporate behavior that benefits the environment also benefits the bottom line.
But the flop is always floppiest before the dawn, as the kids (absolutely do not) say. Whisper it, but investors and business leaders are still checking the math and recognizing that corporate behavior that benefits the environment also benefits the bottom line that Milton Friedman told them to value above all else.
No doubt, green investments are having a grim year. Investors pulled $24 billion from climate-related funds during the first three quarters of 2024, Bloomberg News reported last month, citing Morningstar data. I’d be shocked if that didn’t get much worse in the fourth quarter, during which “Trump trades” of all kinds, including Bitcoin, have been ascendant. Green energy would seem to be the antithesis of a Trump trade. You can already see the damage in the S&P Global Clean Energy Index, which has tumbled in the fourth quarter compared with the S&P 500 Index.
Make no mistake: This is all about vibes. Fine, it’s a little bit about high interest rates, which hurt clean-energy investments. But it’s mainly vibes. Even before Trump’s election, corporate leaders were running scared from ESG in response to a political backlash led by Republicans at all levels of government. Last month, Texas Attorney General Ken Paxton sued several large asset managers, accusing them of conspiring to use ESG investing to hurt the fossil-fuel industry. On Friday, Goldman Sachs said it was leaving the Net-Zero Banking Alliance (part of the Glasgow Financial Alliance for Net Zero, which is co-chaired by Bloomberg LP founder Mike Bloomberg and Bloomberg Inc. chair Mark Carney), joining a stampede of other banks out of such groups. Goldman, like many of its peers, suggested it had achieved a state of green independence and no longer needed the support of others. Maybe, but the subtext in all of these announcements is clear: It’s time to lay low.
That doesn’t mean the logic of investing in clean energy has changed. Despite the fund outflow, assets in climate-related funds still rose 6% from a year earlier because their prices rose, Morningstar noted. And ESG funds overall (meaning not just those focused on the environment but also those paying attention to the “social” and “governance” parts of the acronym) attracted modest global inflows through the first three quarters of the year, according to Morningstar. The big exception is the US, where investors have been withdrawing money for more than two years.
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That Paris Agreement was the product of a global climate-talks machine that is breaking down lately. In its absence, we’ll need new horses to pull humanity toward its goals. Companies can be one of those, and investors have plenty of both carrots and sticks to get them moving.
