The Wall Street Journal raised an interesting question this weekend, examining the rise of so-called “anti-ESG funds:” What’s the point?

Anti-ESG funds typically exclude companies that consider “environmental, social and governance” (ESG) risks, and often attract investors based on their political preferences. The anti-ESG category includes funds such as “God Bless America ETF” (YALL), “Point Bridge America First ETF” (MAGA), and the U.S. Energy ETF of Republican presidential candidate Vivek Ramaswamy’s Strive (DRLL).

That political appeal works, although the anti-ESG category remains a David to the ESG’s Goliath: By mid-2023, anti-ESG funds had about $2.42 billion in assets under management, Morningstar reported, 100 times smaller than funds that did integrate ESG factors ($313.4 billion). After reaching a peak in inflows in Q3 2022, Morningstar said, anti-ESG funds such as Ramaswamy’s “quickly lost steam.”

Why are anti-ESG funds failing to break through, even as Ramaswamy is quickly rising in the Republican polls on the back of his anti-ESG stance? There are a few possible explanations.

Some anti-ESG stock picking may be simply too restrictive, limiting the investable spectrum and increasing its risk. It leads to funds with over-exposure to tobacco or defense or companies that explicitly endorse one-sided political views.

Other anti-ESG funds, such as Ramaswamy’s “Strive 500” face the opposite problem, the Wall Street Journal suggests: By having too light of an anti-ESG tilt, “investors aren’t really getting anything different”—though Strive’s new CEO, Matt Cole, contests that point of view.

Having grown up in a country (Belgium) where almost the entire economy at some point was organized along ideological lines—Catholic or socialist—I’d add a third problem with political-party inspired funds and companies: They create division in society and limit an economy from attaining its full potential.

If you’d like to read the full article in the Journal, you can do so here. If you’d like to hear Strive’s Matt Cole make his case, consider joining us at our Fortune Impact Initiative in Atlanta, on Sep. 12-13, where Cole will be a speaker.

Here’s an additional data point on ESG investing: about two-thirds of institutional investors are actively pursuing an ESG strategy or plan to do so, according to a survey of several dozen investment firms by software provider Vidrio, out this morning.

The main reasons institutional investors are integrating ESG, the survey found, are good old shareholder primacy and free market capitalism: Either their clients ask for it (28%), or it’s a matter of maintaining their current or future competitiveness (36%). 

More news below.

Peter Vanham
peter.vanham@fortune.com
@petervanham

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This edition of CEO Daily was curated by Nicholas Gordon.