ESG Investing Is Fundamentally Flawed (But We Can Fix It!)

ESG investing, also known as socially responsible, sustainable, or impact investing, has exploded in recent years. A recent report estimated that ESG assets will be worth $40 trillion by 2030, representing 25% of all global assets. ESG stands for Environmental, Social, and Governance, and ESG investing screens for companies that score highly in these areas.

It’s an ambitious and commendable style of investing. However, recent research has found that ESG investing could actually be harmful to the planet by encouraging brown firms (firms with high pollution) to be even browner, without impacting green firms (firms with low pollution) at all.

While this suggests that ESG investing, as it exists today, is counterproductive to its own thesis, there are some (controversial, possibly) changes that ESG fund managers could implement to improve ESG, and work towards a greener future.

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All opinions are my own (unless otherwise stated). NOT financial advice.

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My name is Adam, and I’ve been a public sector economist for more than 3 years, and an economics tutor for more than 5 years. I also have a Bachelors degree in Economics. My aim for this channel is to inspire curiosity in economics! I want to explore interesting economic ideas and opinions. If you’re interested, please subscribe to the channel!

Chapters:
0:00 Intro
1:26 Impact Elasticity
3:21 Why Does This Happen?
4:46 ESG funds and Financial Incentives
6:44 Addressing Degrowth
8:41 Fixing ESG

[norude]

Could you do an explainer on worker co-ops