(Bloomberg) -- The US market for ESG-focused exchange-traded funds is floundering.

At least 27 ETFs categorized as being aligned with environmental, social and governance principles have been liquidated so far this year, said Shaheen Contractor, senior ESG analyst at Bloomberg Intelligence. That compares with 36 during all of last year.

And the outlook isn’t promising. The trend will likely continue, particularly if the Republican-led backlash against the investment strategy heats up, according to Contractor.

“Complex themes that struggle to gather assets are most at risk,” she said.

Against a backdrop of increased fund closures, just two ESG ETFs have been introduced this year in the Americas, the fewest since Bloomberg Intelligence started tracking this data about five years ago. The number of fund launches is down from a peak of 124 during all of 2021, Contractor said.

The sector is struggling because cash flows to ESG-focused portfolios have declined significantly and the market has matured, with most large asset managers already offering a crop of such funds, she said.

Actively managed ESG ETFs, which tend to charge higher fees, account for more than half of this year’s fund closings, Contractor said. Still, the analyst said actively run funds offer the benefit of “more flexible strategies, which could gain in importance as asset managers try to stand out in an increasingly competitive market.”

Fund launches peaked in 2021, according to BI research.

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