Are ESG ETFs a gimmick? The debate surrounding the transparency and social agendas of sustainable investing
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ESG – environmental, social and governance – is one of the hottest trends in the investing world, but some investors are calling it a gimmick.
ESG is a new industry of funds launched by companies like BlackRock, Vanguard and Fidelity that are invested in companies that meet certain criteria. These ideals pertain to standards of diversity, equity and inclusion, pollution and carbon emissions, and data security, among others.
But attacks on ESGs have come from all over. New York City Comptroller Brad Lander recently sent a letter to BlackRock CEO Larry Fink demanding the company bolster its climate disclosures and publish a plan to establish a commitment to net-zero greenhouse gas emissions across its portfolio.
Republican politicians, on the other hand, have accused BlackRock of boycotting energy stocks. On Wednesday, Louisiana announced it would pull $794 million out of BlackRock's funds, citing the firm's embrace of ESG investment strategies.
BlackRock did not immediately respond to a request for comment.
A recent New York Times op-ed by New York University Stern School of Business professor Hans Taparia said that, while ESG investment can create incentives for companies to be more socially and environmentally cautious, many investors falsely believe their portfolios are benefiting the world when ESG investing is designed mainly to maximize shareholder returns.
Nearly 90% of stocks in the S&P 500 are in an ESG fund that uses MSCI ratings.
The op-ed further argued that Wall Street needs more stringent rating systems, especially when companies that have received high ESG scores have been criticized for contributing to environmental or social issues.
Arne Noack, head of systematic investment solutions for
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