Those losses may not be the end of the losing streak. “Potentially we could see a continuation of some of the problems we’ve had in the tech sector next year,” said Amarachi, a sustainability analyst at Janus Henderson Investors.
In their quest for low-carbon portfolios, many ESG investors have spent the past few years hoarding shares of big tech companies as a quick fix for their environmental goals. And while interest rates were low and risk appetite high, those allocations generated outsized returns, making ESG instruments look good in the process. But now that rates are so much higher, tech-weighted ESG portfolios are having a hard time.
Janus Henderson, where Seery’s research guides ESG investment decisions, has delisted FAANG shares from its Global Sustainable Equity Fund “for a long time,” he said. And “that has worked incredibly well for us.”
The fund is down 12% this year, less than half that of the MSCI World Information Technology Index. Over the past three years, it has outperformed 93% of its peers, according to data compiled by Bloomberg, having returned at an annual rate of 12% in the period.