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Investors from the UK have withdrawn an unprecedented £1 billion from ESG funds this year, marking a significant trend fueled by a growing disapproval of ‘woke’ stock selection. Figures provided by the Investment Association reveal that ‘responsible’ investment funds experienced a record outflow of £544 million in September alone, contributing to a cumulative exit of over £1 billion in 2023.

Initially embraced for their environmentally, socially, and governance-focused investment approach, these ‘sustainable’ funds gained popularity among DIY investors seeking eco-friendly credentials before the onset of the Covid pandemic. However, the concept of ‘woke capitalism’ has faced mounting criticism for its perceived emphasis on social objectives at the expense of delivering quality goods and services and generating profits for investors.

Detractors argue that companies like BAE play a crucial role in defending democracy in nations facing aggression. Moreover, consumer goods giant Unilever hinted at a departure from its ‘woke’ agenda, with Hein Schumacher, who assumed control of the company in July, expressing a commitment to cease ‘force-fitting’ social justice messaging onto brands.

The phenomenon of greenwashing, where companies exaggerate or misrepresent their environmental commitments, has also contributed to a decline in investor confidence in ESG. A survey conducted by the Association of Investment Companies indicates a notable increase in the proportion of investors concerned about greenwashing, rising from 48% in 2021 to 63% in 2023.

Analysts propose that the unprecedented outflow may be linked to the persisting financial strains on household budgets, dissuading individuals from engaging in investments.

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