Surging oil prices add to ESG fund performance woes

Surging oil prices add to ESG fund performance woes

Hello from New York, where up and down Wall Street the Russian invasion has triggered a significant “risk off” trading mood as the S&P 500 index dropped into a correction.

Oil prices, however, have benefited from the turmoil and neared $100 a barrel on Tuesday. As Moral Money readers may expect, good news for oil stock prices spells trouble for environmental, social and governance (ESG) funds.

In today’s main note I take a look at how the crisis in Ukraine has magnified a problem we can’t ignore — that ESG funds have been underperforming.

Also in today’s newsletter, we have a report from Kristen on the green jobs market. And Tamami goes inside the renewable energy market in China. Read on. — Patrick Temple-West

ESG in the crosshairs of surging oil prices

As the Ukraine crisis unfolds, oil prices have shot higher, putting more pressure on ESG investments that tend to underweight fossil fuel businesses.

The euphoria for renewable energy was already fading in late 2021. But surging oil prices present a much bigger threat to ESG and its constant need to justify its relevance with outperformance. Energy has, by far, been the best performing sector in the S&P 500 this year, and momentum trades will