NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 9, 2016

Environmental, social and governance (ESG) is now big business. What began as a niche market decades ago has blossomed into a multi-trillion-pound industry and continues to grow at an alarmingly fast rate. According to the specialist research provider Eiris, more than £15bn was invested in UK ethical/socially responsible retail funds in 2015, up by 11% year on year.

But as with all growing markets, there have been red flags. In September, BlackRock and Vanguard were accused of hypocrisy when they voted against a resolution to force ExxonMobil to assess climate risk to its business, by dint of the fact that they were signatories to the UN’s Principles of Responsible Investment. These charges of hypocrisy highlight a huge disconnect between ESG the ‘buzzword’ and ethical investing in practice.

The conflation of terms such as socially responsible investment (SRI) and ESG further reinforces the idea that fund managers and investors are not speaking the same language when it comes to ethical investing. Courtiers Asset Management’s head of fund and asset management Caroline Shaw says, beyond fuzzy definitions, ethical and responsible investing covers a continuum of ‘shades of green’.