There is indeed a problem with ESG investing — just not the one you think
Yrjo Koskinen is the BMO Professor of Sustainable and Transition Finance at the University of Calgary’s Haskayne School of Business.
Yet there is a kernel of truth in Republican critique. It reflects widespread backlash against a movement that seems to be increasingly controversial, despite fuelling good returns over the past few years. Too often ESG funds have higher management fees eating up net returns for pension beneficiaries. While such funds have experienced good stock returns since the ESG investment boom started, the party is over now. Most likely returns going forward will be disappointing, but this has nothing to do with ESG “wokeness.” It is simply due to too much money chasing too few good deals.
We need vigilant enforcement and stiff penalties against fraudulent claims, so fund managers will stop repeating exaggerated claims about superior returns for ESG investments. We also need strict enforcement against greenwashing, so fund managers cannot overstate the greenness of their portfolios. Finally, we also need informed investors and pension trustees who refuse to pay the exorbitant fees that are too often associated with ESG funds.
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