For more than a decade, money manager Garvin Jabusch would show a chart of the planet’s rising temperatures when pitching investment ideas to clients, saying they could help save the planet and still make money. These days, he no longer uses the chart and avoids talking about climate change.
“I’ve given up on anyone ever caring about that,” said Jabusch, investment chief of Green Alpha Investments, which manages about $300 million.
He isn’t the only climate-focused investor downplaying references to global warming and related topics. Parnassus Investments, the biggest U.S. sustainable-investing firm, has removed references on its website that its funds are “fossil-fuel free.”
And Engine No. 1, the small activist firm that led the shakeup of ExxonMobil’s board in 2021, has removed wording on its web page that corporate performance is “greatly enhanced” by investing in workers, communities and the environment. The fund now says it invests in companies that are “powering innovation and driving the reindustrialization of the United States.”
Shifting messages to match changing markets is nothing new. But after four years of declining prices for green investments, as well as Republican attacks on behalf of Big Oil for allegedly shunning fossil fuels, sustainable investors are shifting their past talking points in increasing numbers. The election of Donald Trump, an avowed enemy on topics that fall under ESG investing who has called global warming a hoax, may have sealed the deal.
The panicked retreat by investment firms also follows a year when clients pulled a record $20.1 billion from sustainable-investment funds, according to researchers at Morningstar Inc.
Parnassus was founded in 1984 and manages $46 billion out of San Francisco. The firm accounted for almost a third of the industry’s withdrawals amid trailing investment performance. Its biggest fund, Parnassus Core Equity, returned 18.8% last year, compared with the 25% gain of the S&P 500. The fund is up 4% so far this year, outperforming the index.
In response to the outflows reported by Morningstar, Parnassus spokesman Joseph Collins said in an email that those withdrawals are being offset by inflows to products that aren’t public.
Back in 2020, during the boom in environmental, social and governance investing, Parnassus described itself as the “largest pure-play ESG fund company,” with a website replete with references to the strategy. Those are largely gone. Last year, Parnassus said it will no longer explicitly state in its fund prospectuses that it excludes companies that generate significant revenues from extracting, producing and refining fossil fuels.
Collins said the term ESG has been “overused and inconsistently applied across the industry,” resulting in investor misunderstanding and confusion.
“We recognized the need for greater clarity and precision,” he said. “We chose to use the term ‘sustainability’ because it’s a better fit for us as it describes how the high-quality companies we seek for our portfolios can sustain their advantages and long-term success.”
In 2020, Engine No. 1 emerged with its shareholder push against Exxon, pressing the oil giant to invest in more profitable drilling and clean energy, among other things. The firm, founded by hedge fund manager Chris James, had said on its website that the interests of Main Street and Wall Street would eventually align, creating opportunities to work with companies to boost shareholder value.
That wording has been removed. Engine No. 1 said last month that it has partnered with Chevron on a project focused on data centers, which rely on immense amounts of energy and water to operate. The fund said the Chevron deal is about allocating capital in an economy that “needs dramatically more power.”
