Arr, thar be a mighty skirmish in the land of Corporate America betwixt faithful investing and woke investing!
2023-07-02
Avast ye scurvy dogs! Fer the first time in ages, the mighty ESG investing be slowin' down. But fear not, ye landlubbers! Nay shall ye be deterred by the critics, as ye pursue yer own faith-based investin' with a hearty yo-ho-ho!
For the first time in decades, the growth of environmental, social, and governance (ESG) investing is slowing. ESG assets have grown exponentially over the past two decades, reaching an estimated $35 trillion in 2020. ESG has been embraced by global asset management firms and is associated with politically progressive initiatives.ESG managers have sought to influence corporations, governments, and other entities on behalf of investors. However, an anti-ESG movement has emerged, with accusations of "greenwashing" and claims that ESG leads to poorer performance and higher costs. Critics argue that asset managers should not use investor capital to push progressive agendas without their knowledge or consent.
As a result, the growth in ESG mandates has begun to slow, with many funds losing assets. Some argue for a "back to neutral" approach, focusing solely on shareholder return without considering the social impact of investments. However, completely abandoning values-based investing would be a mistake.
The idea of incorporating values into investments is not new. Religious texts dating back thousands of years offer guidance on ethical views of money and investing. Negative screens, such as avoiding "sinful" industries, have been used for centuries. Faith-driven investing frameworks, such as Muslim Shariah Investing and Christian Faith Driven Investing, seek to invest based on religious values.
While the faith-driven investing space is currently small compared to ESG, the crisis of confidence in ESG frameworks may lead to the emergence of more diverse options. All investing has an impact, positive or negative, and it is important to have a constructive vision of marketplace flourishing.
It is encouraging that people are questioning the values of ESG, but it would be a shame to abandon the entire idea of values in investing. People can and want to have a positive impact on the world through their financial capital, and alternative frameworks, rooted in faith traditions, offer constructive options for aligning investments with personal values.