An inconvenient truth about ESG Investing by Mark Yamada
Appeared in Investor's Edge Magazine on May 9, 2022
Gina's Thoughts
Investments in ESG (Environmental, Social, Governance) funds have seen explosive growth over the past several years. "At US$35 trillion, ESG already represents one-third of global assets under management, according to Bloomberg Intelligence, with more than 40% growth projected through 2025." Investors believe they are "Doing Well, by Doing Good" but they are likely doing neither. The past decade has seen ESG being weaponized to drive divestment in oil and gas companies. The author of the article succinctly summarizes how divestment is not "Doing Well, by Doing Good". "The result may be that divestment does more in terms of virtue signalling than investing impact. It can also be costly for portfolios. While hundreds of institutions have committed to divesting some or all of their fossil fuel investments, the implications for portfolios -- particularly in Canada, where oil and gas make up 13% of the S&P/TSX Composite Index -- can be significant when prices for those commodities rise as they have over the past two years." Divestment has no impact on emissions reductions and it can cost the investor on the returns side; in other words "Not Doing Well and Not Doing Good".