Viewpoint: How Socially Responsible Investing Lost Its Soul

Friday, December 21, 2018

By Rachel Evans

“It’s easy to invest in what you believe.”

That’s the pitch for TD Ameritrade’s foray into socially responsible ETFs, one of the year’s hottest financial crazes.

Whether it’s climate change or gender diversity, today’s activist age has spawned an array of funds designed to appeal to millennials with a cause. And everyone, from BlackRock Inc. to Goldman Sachs Group Inc. and hedge fund titan Paul Tudor Jones, is jumping on the bandwagon.

Yet Wall Street’s embrace has come at a steep price.

All too often, critics say, revenue-chasing triumphs over principles. Investors who think they’re buying environmental, social, and governance funds—ESG for short—to promote a better world often wind up with costlier products that are, in almost every other respect, the same as any index fund. Criteria are so broad and disparate that companies as unlikely as Exxon Mobil Corp. and Philip Morris International Inc., the maker of Marlboro cigarettes, make the cut in some cases.

In other words, ESG lost its soul in the bargain. To the naysayers, what began as a way to make a difference has become little more than an avenue for Wall Street to reap big profits, all while gaslighting the American public.

Source: Bloomberg (link opens in a new window)

ESG, impact investing