Let’s start an ESG debate: I am asking some questions
ESG was meant to unite the investment community around the basic idea that environmental, social and governance factors should be considered during the investment process to improve risk management. Many long-time investors have argued, “ESG was always factored into our investment process, we just didn’t have a label on it.” Like many things in today’s highly politicized world, what started in good faith to improve transparency by measuring and reporting ESG risk factors has morphed into a weapon … by both sides of the political spectrum.
Whether we are talking about a blue state activist trustee who wants to impose their politics into the investment process or a red state legislature looking to get rid of ESG completely, the investing world has now collided with the political world. No longer is the mandate to be a fiduciary delivering investment returns for retirees, but rather “deliver returns while only investing in things we approve politically.”