(Bloomberg) -- A deluge of do-good ETFs once flooded US exchanges and drew in billions. But as investors contend with fears of a recession, the trend is reversing and more of these funds are closing up. 

Cathie Wood’s Ark Transparency ETF (ticker CTRU) is the latest ESG exchange-traded fund set to shutter, bringing the total to seven this year. While do-good funds were popular during the post-pandemic bull market when virtually every strategy surged, they now account for 15% of all US ETF closures this year, according to data compiled by Bloomberg. They only made up about 4% of the funds in the industry at the start of the year.

It’s been a brutal turnaround for an investment strategy that grew in popularity as investors sought to finance companies that battle climate change or focus on diversity in their management. An unforgiving year for markets has put do-good investing firmly in the back seat, with investors fleeing ESG funds as portfolio protection becomes a priority.

“This is a really difficult market -- I think people tend to go back to the basics,” said Cinthia Murphy, director of research at ETF Think Thank. “We all just want to survive this market and not lose everything we’ve built so far.” 

The US ETF industry has already shed more than $1 trillion this year as investors remain concerned that the Federal Reserve’s aggressive policy-tightening campaign could tip the economy into a recession. But socially responsible funds face a particularly challenging environment as the ESG market has grown increasingly crowded in recent years. With a modest $571 million invested on average in 132 US ESG ETFs, such funds have lower asset-to-product ratios compared to growth and value funds, according to data compiled by Bloomberg. 

“The ESG ETF space is already over-saturated,” said Nate Geraci, president of The ETF Store, an advisory firm. “We’re going to continue to see an uptick in ESG ETF closures.”

The downturn in markets has made ETF issuers less tolerant of funds that aren’t seeing much demand, as falling prices leads to depreciation in fund assets that issuers charge fees on.

“At the end of the day, ETF managers are just earning basis points on assets,” Amrita Nandakumar, president of Vident Investment Advisory. “Issuers are going to be more quick to close funds. They just don’t have the ability to be patient as they would in a more favorable market environment.”

Read more: Wall Street’s Deluge of ESG-Fund Launches Risks Breaking Point

Wood’s soon-to-be-shuttered transparency-themed fund launched at the end of last year and gathered only $12 million in assets since its inception, the least among all the ETFs her firm offers. While the product isn’t explicitly branded under the ESG label, it tracks an index that shuns industries including alcohol, gambling, oil and gas, similar to the methodology of many socially responsible ETFs.

Index-tracking funds face an uphill battle grabbing investors’ attention while active funds, or ones that focus on specific themes such as clean energy or electric vehicles, are likely to have more success staying afloat, Geraci said.  

“A more plain-vanilla, index-based ESG ETF is going to have an extremely difficult time standing out,” he said. 

Six out of the seven ESG funds shuttering this year track indexes. Apart from Wood’s fund, they also include an ETF started by a group of large financial institutions which launched at the United Nations’ COP26 summit and ended up facing a $97 million shortfall.

Large issuers like BlackRock Inc. and Vanguard Group Inc. have already gathered assets in index-based ESG ETFs, “so unless you’re going to come in and compete at rock-bottom fees, it is going to be extremely difficult to make any headway,” Geraci said.

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