October 14

Analysis: The Thorny Truth About Socially Responsible Investing


It’s easier than ever to invest ethically — or, at least, to be told by marketers you are. Whether you’re actually doing it is harder to figure out.

Investors have become eager to put their money toward good in recent years. In 2020, assets under management using sustainable investing strategies in the United States reached $17.1 trillion, according to a report from the Forum for Sustainable and Responsible Investing. That’s one of every three dollars under professional management in the country. Investments that consider environmental, social, and governance factors— or ESG — are gaining more public attention, too. There are over 800 registered investment companies with ESG assets.

It’s good that the general public, including investors, is trying to pay attention to where money flows. What isn’t so good: Plenty of people think they’re investing in ways that match their values when in reality, they aren’t. It’s really easy to slap the ESG label onto an investment product, likely increase fees on it a little bit, and call it a day. Plenty of big investors claim they’re managing their money in an environmentally friendly, socially responsible way — and assume nobody’s peeking behind the curtain.

“The problem with the financial markets is they’re so big that you can’t possibly affect them by deciding not to own something that’s objectionable,” Fancy said. “In five milliseconds, someone who doesn’t give a shit will go buy it.”

Photo courtesy of Edward Howell.

Source: Vox (link opens in a new window)

corporate social responsibility, global development, impact investing