A few years ago, ESG investing, also known as sustainable, ethical, or socially responsible investing, was all the rage. It was consistently touted in the media as the future. This meant investors were hot on it. Advisers would have clients, and prospective clients, asking what ESG offerings they had. It seemed many investors wanted to be green and ethical, feeling like they were making a difference with their money.
The heat could be seen in the money flowing into ESG funds. Morningstar data showed in 2021 that global money flowing into ESG funds hit a peak of $185 billion USD in Q1. Each subsequent quarter for 2021 saw flows above $140 billion. These numbers were almost triple the money flows seen only a year earlier.
Back then there were a couple of ideas that accompanied the interest in ESG investing. These ideas weren’t exactly assessed with a rigorous eye. Quite often they were coming from the marketing or public relations side of things. These ideas were swallowed by a mostly uncritical media and pumped back out to the public as facts.
It feels good, but…
The first was the idea that an investor could achieve better returns by taking less risk because there would be less risk attached to ethical and environmentally conscious firms.
This contradicts a fundamental rule of investing that every investor should keep at the front of mind.
Read the Full “What Happened to ESG Investing?” post
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial adviser to take into account your personal investment objectives, financial situation and individual needs. Anyone looking to build a portfolio should seek financial advice to find out which strategy is right for them, if you are a high net worth investor looking financial advice then you should consider a high net worth financial adviser, they can help you identify your goals and put in place a reliable strategy to pursue them.
