Ever wonder what the challenge is with going green?
During the first half of this year, ESG investing was one of the most cited phrases in earnings calls among companies using environmental and social factors. Unfortunately, problems like the recession, stock markets tanking, and US midterm elections have put sustainability efforts on the back burner for many companies.
The rapid increase in ESG fund investing has now stopped completely, according to a Refinitiv analysis provided by CNN Business.
ESG funds in September saw their largest outflow of investor cash since the beginning of the recession in March 2020. Additionally, these ESG funds saw assets under management go above $8.5 trillion in 2021. Now, they pool at under $7 trillion.
All of the issues, combined with a rainy forecast as far as the economy goes, have put efforts toward going green at a halt. A not-so-appealing mix of problems makes it hard for businesses to stay ESG-friendly.
Have you ever thought about the term “greenwashing?”
It’s a term that US politicians and business leaders use to accuse companies of making themselves look more environmentally friendly than they really are. This creates a false promise to consumers that they’re actually making sustainability efforts to gain trust and business. Firms like DWS and Goldman Sachs have lately been accused of using the ESG label under false pretenses.
The ever-so-publicized Elon Musk even made claims of ESG being a scam on Twitter, referring to Tesla being removed from an S&P ESG index, which has a documented history of damaging the environment.
On top of that, a growing movement of the political right in the United States has begun, steering away from asset management firms that invest and vote with ESG values in mind, entirely. Elected officials in red states have voiced their distaste for the “values” they claim these funds promote, claiming that they’re not what they claim themselves to be.
The debate over how to regulate ESG funds is also adding to this confusing picture. Experts say standardizing ESG criteria will alleviate investor hesitation, but the current fight to do so is actually making things more challenging.
The hurdles facing ESG investing prove that addressing this issue is easier said than done, especially with the looming difficulties business owners are facing.
February 1, 2023 at 8:59 am
Interesting article! It’s great to see the current challenges facing ESG investing being highlighted. Thanks for the informative read.