Mounting pressure from research costs and greenwashing allegations are contributing to tech sector turmoil, writes Fiona Keating
Despite sustainable fund assets increasing $3.9trn in the six months to September 2021, the pace slowed down at the end of the year, according to Morningstar data.
Tech stocks were still amongst the largest in ESG funds, totalling around $340bn. These included Apple, Microsoft and Alphabet.
Some sceptics believe the green bubble has burst, and analysts report that not all companies or private investors who buy sustainable funds are doing it for reasons of climate change. There are many ‘tourists’ who are buying stocks because they are the best performing funds, says David McCann, equity analyst at Numis.
Tech sector turmoil hits Facebook
The most spectacular tech fall is Facebook (now renamed Meta Platforms). The company dropped nearly 700 places, ranked at 712 in the JUST 100 list, Just Capital’s annual analysis of corporate performance. The tech giant lagging far behind tech peers and even fossil fuel companies such as Exxon Mobil.
There are reports that banks could fare better this year, as these are generally underweighted by ESG funds, says Tom Mills, equity analyst at Jeffries.
In the Russell 1000 Index universe of large-cap US companies, the only non-tech company in the top ten is Bank of America.
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Focusing on the S in ESG, Bank of America recently raised its minimum wage to $21 and has cut its overdraft fees.
However, the slowdown may be temporary, as sustainability has now become an important part of investment strategies, say ESG fund managers.
Fluctuations in the market and tech sector turmoil are to be expected. As Kenneth Kim of EQIS Capital Management said, “when investing in SRI [socially responsible investing] or CSR [corporate social responsibility] funds, one should expect some underperformance.”
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