Even critical supporters of ESG seem to be rethinking its value. According to ESG reporting expert Eccles, “we would be better off if ESG investing would just go poof” and non financial considerations were integrated into the traditional investment research process.The confusion and exaggeration surrounding ESG investing detracts from its real potential.
While ESG investing might be a way to measure risks to corporate cash flows, it is no way to advance planetary sustainability. Instead, decarbonization and planetary welfare would be better advanced by spending time on the following:Asset managers are trained, measured, incentivized, and bound to maximize their client’s returns. It is naïve and unreasonable to expect corporate executives or investors to put public interests ahead of private interests when tradeoffs are present.
None of these recommendations are straightforward. None will occur absent concerted civic engagement, global coordination, and a redistribution of power. At the same time, none rely on convenient confusion to oversell market based voluntary solutions. Though ESG investing is oversold, it is not the “devil incarnate.” The addition of ESG fundamentals to traditional investing might someday allow investors to better predict returns and risks, but it will not save the planet.
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