Inflows into U.S. exchange-traded funds with higher environmental, social and governance standards have dropped sharply in the past two months. ESG equity ETFs added about $1.2 billion in December and January combined, compared with roughly $10.8 billion in same period one year earlier - an 89% drop-off.
Washington regulators and corporate America are rushing to adopt new corporate environmental, social and governance (ESG) policies. Enthusiasts claim that these policies are both good business and good for the world. Whether the latter is true is a matter of opinion. Whether ESG policies are good for a company’s bottom line, however, has been the subject of several hundred peer-reviewed studies over the past four decades. And the answer is: It depends.
Interest in environmental, social, and governance-themed, or ESG, investing has seen significant growth in recent years, but it has been matched by persistent complaints from some market participants. Chief among these is a lack of clear definitions for what constitutes a “socially responsible,” “green,” or “sustainable” investment product.
