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ESG Funds

What are ESG Funds?
Thanks, Ron

Comments

  • edited June 2022
    There is basic ESG info at the link below. Calvert/Eaton Vance/Morgan Stanley is a huge ESG firm and most firms now have ESG funds. A couple of better known ESG funds are Parnassus/AMG PRBLX and CREF Social Choice (Balanced) VA QCSCIX. The SEC is in the process of tightening ESG claims by funds. ESG funds had been doing well until this year, but 2022 has been difficult for them as they had high tech exposure and low/no energy exposure. So, some ESG funds are looking to get back into energy by following relative-ESG approach (inclusive, ESG-ratings-based approach instead of the older exclusionary approach).
    https://ybbpersonalfinance.proboards.com/thread/113/esg-investing
  • Yogi, thanks. I am so disgusted with much going on. I do own PRILX for many years. It has been the worst year 2022 for much of what i have. At age 88 I want to avoid anything that makes 2022 so bad.
  • Further, some view ESG strictly from an investment perspective - how do these factors affect a company's risks - while others view ESG investing as a way to improve the world, or at least not contribute to its decline.

    For the first perspective (and a discussion of how varied ESG metrics can be):
    https://www.fastcompany.com/90754822/is-it-time-to-rethink-what-esg-investing-means
    “There’s a sort of obscure language that ESG raters use to talk about this stuff,” says Thomas Lyon, director of the Erb Institute for Global Sustainable Enterprise at the University of Michigan’s Ross School of Business. “They like to talk about 'materiality,’ which means, is this particular thing going to have a material impact on our bottom line? It’s not asking the question, ‘Will it have a material impact on the planet, or on people?’ It’s all about the bottom line.” For example, MSCI, one of the largest companies that rates companies for ESG, says on its website that its ratings are “not a general measure of corporate ‘goodness'” or even “a synonym for sustainable investing”; instead they “provide a window into one facet of risk to financial performance.”
    The SEC recently proposed a regulation that would require companies "to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition." Clearly focused on ESG from a bottom line perspective.

    See also this piece published today at Harvard Law on greenwashing and various regulatory responses to it:
    https://corpgov.law.harvard.edu/2022/06/23/regulatory-solutions-a-global-crackdown-on-esg-greenwash/

    I regard ESG as SRI 2.0. Whereas SRI tended to use screens (often exclusionary or negative, sometimes inclusive or positive), ESG tends to take a more holistic perspective, recognizing that no company is perfect in any aspect. Different ESG raters give different weights to various factors. Thus a company included in one ESG list may be excluded from another.

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