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

By Judy Samuelson

Clients drawn to socially responsible investing are told they can have it both ways—competitive or even superior returns, plus positive societal and environmental outcomes.

Yet anyone working at the interface of business and society knows this is not a win-win world; there are real tradeoffs involved.

Funds created to respond to the growing demand for investment vehicles that fit the attributes of “ESG”—environmental, social and governance—are now in a squeeze play between investors seeking assurance that their money is aligned with their morals and demands on business that become more complex by the day.

Can ESG metrics catch up?

The UK is sufficiently concerned about what’s marketed under ESG investment labels to have released in July 2021 a set of disclosure requirements and principles designed to clean up this rapidly growing, and evolving, domain of investment. The UK release follows years of debate in the EU about the need for specific measures and standards. The US isn’t far behind; in April the SEC published a risk alert, calling out fund managers seeking “gold in the green.”

Photo courtesy of Edward Howell.