One of the hottest topics in the investment world is ESG investing. It stands for Environmental, Social and Governance investing. The large firms are dedicating large resources towards creating funds and portfolios to meet what they perceive as the demand for these products. The question is, do these efforts do anything to achieve the moral and ethical goals of the investors putting their funds in such strategies? Is the increased cost of weeding the “good” from the “bad” players in these areas worth it? The stated goal of ESG Investing is to "punish" those companies which have low scores through the ESG rating metrics by not buying those companies shares, which would in turn drive down their share price and indirectly increase the cost of borrowing. However, what does it really mean to be a "Green" company? If the company is a services business, there really is not any carbon footprint involved and they will always score highly. In addition, certain companies may be making major strides but still are not there yet, they are called "Brown" companies, does this punishment hinder them from trying accomplish the goal that ESG is focused on?
Below is a great podcast speaking about this topic. It mostly addresses the E and the G as the S portion is a more recent movement, which is extremely politicized, and there likely isn’t enough data there to have any findings. If this is a topic that interests you, the podcast is definitely worth a listen CLICK HERE TO LISTEN.