Investors couldn’t get in fast enough. In April 2021, BlackRock launched a new exchange-traded fund aimed at identifying the winners of the transition to a low-carbon world. It raised a record $1.25 billion in one day, making it the largest-ever ETF debut. The success underscored the exploding demand for products tailored to environmental, social, and governance, or ESG, investing—those with a mission of addressing complex problems such as climate change and economic inequality.

Last year, however, the story began to sour. Many ESG, or “sustainable,” funds—the terms are used interchangeably—suffered from poor performance, missing out on rallies in oil and coal. The strategy came under attack from conservative politicians decrying “woke capitalism.” Others charge that the strategy has little to show when it comes to improving life on the planet. The industry was also rocked by some high-profile scandals.