There is a lot of noise about ESG these days, and it’s coming from different directions. Mostly from Europe comes the claim that ESG is just greenwashing by the world’s largest asset managers, distracting attention from the urgent need for comprehensive policy solutions to climate change and other global sustainable development goals. From traditionalist investors, ESG is said to be unnecessary for investment decision-making and doomed to underperform. And Republicans in the United States have recently ginned up the idea that ESG is a scheme to advance the “leftist” goals of putting the fossil fuel industry out of business and imposing diversity, equity, and inclusion on corporations that don’t want it.
Most of this is nonsense, but it muddies the waters for sustainable investors, advisors, and asset managers. If you are a sustainable investor or interested in becoming one, what should you make of all this? If you are a financial advisor, how should you advise your sustainability-minded clients? If you are an asset manager, how should you be communicating your approach to advisors and end investors? My advice is to block out the noise and focus on these three points:
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