Goldman Sachs Closes Climate ETF as Investors Flee ESG
Goldman Sachs, the ETF issuer with $30.6 billion in 41 ETFs, is shuttering a $7.64 million climate equity exchange-traded fund two years after its launch as ESG funds come under regulatory scrutiny and face conservative political backlash.
The asset manager announced they were closing the Goldman Sachs ActiveBeta Paris-Aligned Climate U.S. Large Cap Equity ETF (GPAL) on Dec. 12. The fund is expected to liquidate in mid-January, according to the firm’s press release.
Declining Popularity of ESG ETFs
While ESG investing surged in popularity in 2021, the sector has since struggled as it has faced conservative pushback. There were more ESG closures than launches in the third quarter of this year, according to data from Morningstar. ESG ETFs also saw about $2.7 billion in outflows in the third quarter.
The passive fund, which started trading in December 2021, tracked the Goldman Sachs ActiveBeta Paris-Aligned U.S. Large Cap Equity Index and its portfolio holdings were weighted passed on companies ESG criteria based on the Paris Climate Agreement’s carbon reduction goals. The fund’s largest holdings were Apple, Microsoft, and Nvidia.
The fund gained 21% year to date, nearly matching the S&P 500. Yet the fund still saw more outflows this year as it lost about $1.8 million since the start of 2023. In its lifespan, the fund sunk into net negative inflows.
ESG ETFs Suffer Closures, Regulatory Scrutiny
Issuers have also faced legal scrutiny for ESG investing. Most recently, a House of Representatives panel subpoenaed Vanguard as part of its ongoing investigation into whether ESG funds violate antitrust laws because they don’t let investors choose to invest in oil and gas.
While ESG funds are closing at a higher rate than they are launching, it is not all negative news for the sustainable investing industry. Some metrics show positive signs for the sector. A survey from Sage Advisory Services found that seven out of 11 ETF providers said that ESG was still a first or second priority for their firm, and that 40% of recent ETF launches included themes like low carbon emission, clean energy, and biodiversity.
Contact Lucy Brewster at lucy.brewster@etf.com.
