Today, Explained
Is ethical investing a sham?
Jul 19, 2023
James Surowiecki, a contributing writer at The Atlantic and author of 'The Wisdom of Crowds,' critiques the current state of ESG investing. He explores the historical evolution of ethical investing and highlights the political tensions surrounding it, particularly from Republican candidates. Surowiecki raises alarms about the legitimacy of ESG ratings and argues that they may not ensure true corporate accountability. He also questions the financial performance of ESG funds compared to traditional investments, revealing concerns over fees and market manipulation.
25:50
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Quick takeaways
- ESG investing aligns investments with ethical values by avoiding morally conflicting companies.
- ESG funds may not significantly outperform traditional index funds due to subjective ESG assessments and higher fees.
Deep dives
Overview of ESG Investing and Its Origins
Environmental, Social, and Governance (ESG) investing focuses on identifying companies that excel in socially progressive criteria like environmental sustainability, social diversity, and good governance. ESG investing originated back in the 1970s under the term socially responsible investing, aiming to align investments with ethical values and avoid morally conflicting companies. Companies supporting apartheid or producing harmful products were avoided. Over time, ESG investing evolved to incorporate a broader range of ethical considerations, leading to the rise of ESG funds.
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