Is ESG losing money?
Global ESG Assets Fell to $30.3 Trillion from $35 Trillion Amid US Pullback - Bloomberg.
Activist investors are expected to carry out fewer environmental and social campaigns this year after the strategy proved less lucrative than other shareholder agendas, according to business consulting firm Alvarez & Marsal Inc.
“When ESG funds underperformed in 2022, we blamed it on their energy underweight,” said Ma. “But a second consecutive year of underperformance in 2023 can no longer be easily brushed aside.” In 2023, ESG funds were dragged down by too much exposure to clean tech and not enough to big tech.
One of the main challenges is that ESG scoring methodologies tend to focus on how well companies manage their internal processes, rather than the real-world impacts of their products and services.
Anti-ESG lawmaking efforts, which first emerged as a trend in 2021, reached new heights this year with over 150 anti-ESG bills and resolutions introduced in 37 states. Most of these bills were rejected or failed to advance, but as of December 2023, at least 40 anti-ESG laws have been enacted in 18 states.
Key Takeaways. Retail investors do care a lot about the ESG-related activities of the firms they invest in, but only to the extent that they impact firm performance, independent of ESG performance.
By considering ESG factors, investors get a more holistic view of the companies they back, which advocates say can help mitigate risk while identifying opportunities.
After years of touting Environmental, Social, and Governance (ESG) principles, major financial asset managers are dissolving related ESG funds. This move is attributed to backlash from Republican states. On September 15th, BlackRock announced its ridding of two ESG mutual funds.
According to a report from Morningstar, ESG (Environmental, Social, and Corporate Governance) funds faced their worst year on record in 2023, as investors pulled out $13 billion.
However, there are also some cons to ESG investing. First, ESG funds may carry higher-than-average expense ratios. This is because ESG investing requires more research and due diligence, which can be costly. Second, ESG investing can be subjective.
Why is Elon Musk against ESG?
Musk himself became a vocal critic of ESG ever since Tesla was first booted from the S&P 500's sustainability index a year ago. After Fortune reported some two weeks later about allegations over fraudulent ESG investing by Deutsche Bank, Musk claimed all ESG lists were suddenly fraudulent.
Republican politicians have criticized ESG because they say they consider it an effort to use financial tools for the purpose of advancing liberal political goals.
The first group to coin the phrase ESG was the United Nations Environment Programme Initiative in the Freshfields Report in October 2005.
The business community is experiencing significant shifts around ESG priorities driven not just by Covid-19 but also by the economic downturn, social unrest and extreme weather events. “For consumers, ESG issues are influencing what companies they work for, buy from and invest in.
The term ESG was popularly used first in a 2004 report titled "Who Cares Wins", which was a joint initiative of financial institutions at the invitation of the United Nations.
The core concept of ESG investing has existed for centuries, dating back to religious codes banning investments in slave labor. Fast-forwarding to the 1960s and 1970s, divestments from South Africa were first advocated to protest the country's system of apartheid.
Europe maintains its gap with other regions of the world (29.45), well ahead of South America (40.33), North America (41.17), Oceania (41.77), Asia (48.17) and Africa (57.55). The top three positions are once again held by Nordic countries, with Finland in first place, followed by Iceland in second and Norway in third.
Americans say ESG is a-okay
ESG and sustainability are tied for the top, at 23 percent each. Corporate social responsibility is second, at 21 percent, followed by purpose (11 percent), corporate citizenship (8 percent), stakeholder capitalism (7 percent) and stewardship (5 percent).
|ESG Risk Rating
|Bayerische Motoren Werke AG
|41 out of 86
|46 out of 86
|53 out of 86
|Toyota Motor Corp.
|74 out of 86
ESG means using Environmental, Social and Governance factors to assess the sustainability of companies and countries. These three factors are seen as best embodying the three major challenges facing corporations and wider society, now encompassing climate change, human rights and adherence to laws.
Who owns BlackRock?
BlackRock is not owned by a single individual or company. Instead, its shares are owned by a large number of individual and institutional investors. The biggest institutional shareholders such as The Vanguard Group and State Street are merely custodians of the stock for their clients.
The firms' strong support of ESG investing in recent years has led some financial advisory firms and a segment of the public to question whether financial institutions should concentrate on financial performance rather than other considerations. BlackRock and Vanguard have a reputation for backing ESG initiatives.
BlackRock is the largest money-management firm in the world with more than US$10 trillion in assets under management. In April 2022, Fink's net worth was estimated at US$1 billion according to Forbes. He sits on the boards of the Council on Foreign Relations and World Economic Forum. Los Angeles, California, U.S.
BlackRock is publicly owned, with its shares held by various shareholders, including institutional investors like Vanguard Group and State Street Corporation and individual shareholders. The specifics of these shareholders can change over time.
Vanguard currently offers several exclusionary ESG products across equity and fixed income that help investors to avoid certain ESG risks.