Stockholm (NordSIP) – Amid the explosion of investment into ethical funds – global sustainable investment assets were up by 25% in 2016 from 2014, according to the Global Sustainable Investment Alliance (GSIA), with the SRI investment sector hitting a record $23 trillion – it is tempting to assume Economic, Social and corporate Governance (ESG) has penetrated public consciousness and the investment community to the point of irreversibility.
That public and investor consciousness are increasing seems beyond doubt with, for example, a surge in green bond sales to fund projects like wind farms and other types of renewable energy around the world. However, some managers remain sceptical, according to a Reuters report, with a slice of the criticism amounting to suggestions that ESG investments may amount to little more than an elaborate marketing exercise.
“While environmental, social and governance factors should always factor into investment decisions, this is largely a marketing exercise,” claimed Steve Goldman, global Portfolio Manager with Kapstream Capital, an Australian fund with $7.6 billion in fixed-income assets, who added that his clients had not demanded a responsible investment fund. Associated problems relate to the lack of commonly agreed standards as to what constitutes a green bond and a lack of guarantees that proceeds actually go to their designated projects.
Equity products can also be problematic, in as far as some marketing departments might “greenwash” products that might be not be substantially different to standard products. In addition, an incentive for such “greenwashing” may be that ethically-inclined investors typically pay higher fees to managers in sustainable investment funds.
“I find it difficult as a consumer to do the due diligence I would like to do because even the ethical funds are not always totally transparent about what they define as ethical,” retail investor Mereiah Foley, an academic, told Reuters.
Meanwhile, the surge of investments into ethical funds continues unabated, particularly since the 2015 Paris Climate Agreement and amid concern with U.S. President Trump’s plans to slash environmental regulations.
Read the Reuters story here.
Picture (c) akov Kalinin—shutterstock