ESG Concerns Shun the World’s Most Liquid Market

A French pension fund and several other ESG funds are shunning the U.S. Treasury market. The funds found fault this week with the United States government and listed reasons for divestment.

According to Bloomberg, ESG funds at Erste Asset Management, Joh. Berenberg Gossler, and Union Investment are leading the trend. 

French pension fund lists reasons for Uncle Sam divesting

These groups listed concerns about U.S. policy on nuclear weapons, climate change, capital punishment, and more. These factors have fueled an exodus from the most liquid market on the planet.

“ESG-dedicated investors would usually avoid or question investments in U.S. Treasuries,” said Rupini Deepa Rajagopalan at Berenberg. That fund oversees 36.7 billion euros.

This asset manager cited U.S. stances on nuclear weapons and climate change as reasons to avoid the U.S. bond markets. 

The report also listed the $36 billion French Public Service Additional Pension Scheme as another firm bailing on the U.S. A spokesperson listed capital punishment as a reason for the divestment.

Will ESG funds struggle? 

As we noted Tuesday morning, the sudden rush of ESG standards and funds feels familiar and concerning. Recently, British analyst Daniel Litvin expressed our concerns perfectly.

As financial institutions rush to profit from the boom in sustainable investing, they risk overselling its ethical and commercial benefits. It would be a shame if a movement with genuine potential to change the world were stopped in its tracks by old-fashioned misselling.”

[Related: Climate Change Protests in London: Activists Glue Themselves to BlackRock’s Doors]