Energy plays haves slipped out of favour with emerging market equity funds, Steve Johnson writes for the Financial Times, “in what appears to be a structural trend, rather than a cyclical one driven by weak oil prices.” A new study by Copley Fund Research shows that “12% of EM equity funds now hold no oil stocks … This is a marked change from the period up to 2012, when virtually every fund held at least one oil and gas company stock.” In the past, oil stocks had fallen in and out of demand based on movements in global prices. Despite the rally in oil prices over the last several months, however, “there are quite a few funds who are happy to hold nothing,” says Copley founder Steven Holden.

So what’s new this time? Tech plays are winning new allocations, but perhaps a bigger issue is “the seemingly unstoppable rise of mantras such as “ESG”, which involves taking environmental, social and corporate governance issues into account in an investment decision.” This makes things more difficult for oil companies, particularly in emerging markets — some of which are considered the world’s “biggest contributors to global warming, and therefore, climate change,” Mirabaud Asset Management’s Daniel Tubbs says, explaining that as part of a firm’s “fiduciary duty” to clients, “we are looking for long-term exposure to sustainability trends.”