Environmentally conscious investing received a lot of attention last week after the world’s largest asset manager said it plans to put climate change and sustainability at the center of its investment approach.
FILE - In this Jan. 6, 2020, file photo wind turbines stand on a hill and are surrounded by fog and clouds in the Taunus region near Frankfurt, Germany. .
“I don't think these things have been very well defined so far,” said Chester Spatt, finance professor at Carnegie Mellon's Tepper School of Business and former chief economist at the Securities and Exchange Commission. “ESG investing is emerging and increasingly important, and I think this will be a first-order issue on regulators' agenda in the next few years.
SRI, meanwhile, is more akin to investing alongside one's morals. The term has fallen out of favor with some, though, who worry it's too reminiscent of the industry's earliest funds decades ago that simply excluded tobacco companies and other “sin” stocks rather than doing more rigorous analysis.To see how nuanced things can get, consider BlackRock’s blockbuster announcement.
For its part, BlackRock promises to work with index providers to come up with more and better sustainable indexes, which can lead to new index ETFs. But just like an investor can't blindly jump into a “growth” or “value” stock fund and assume they know what the manager's philosophy will be, investors need more details before they consider joining the sustainable investing field.
But one company can have very different ESG scores from different ratings companies, even though they look at the same sets of data, said Jennifer Coombs, associate professor at the College for Financial Planning.
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