Arguably, no investing style has been on the receiving end of as much criticism as environmental, social, and governance (ESG) investing.
For its supporters and those interested in implementing its benefits in their portfolios, the good news is that while they’re loud and vocal, the critics don’t speak for all market participants. In fact, data indicate that many registered investment advisors (RIAs) and retail investors believe that ESG is credible, important, and increasingly mainstream.
ESG Benefits Gaining Clarity
A recent Bloomberg Intelligence survey of 250 C-suite executives and 250 senior investors across the U.S., Europe, and Asia-Pacific found that ESG principles are increasingly used to "improve profit, competitiveness and brand value.”
To be sure, those are important traits, but other points could pave the way for growth by ETFs, such as CDEI, CVMC, CVSE, and more. Notably, the poll found that 85% of investors believe ESG leads to “better returns, resilient portfolios and enhanced fundamental analysis” and a comparable percentage of high-ranking executives see value in employing ESG principles to formulate strong corporate strategies.
Potentially bolstering the long-term case for environmental, social, and governance ETFs is that criticism of the investing strategy is drawing warnings from some experts. For example, some chief executive officers have warned states pushing anti-ESG legislation that those efforts could harm their business-friendly reputations.
Of course, the boo birds are likely to highlight recent weakness in terms of fund flows to ESG investment products. Indeed, the third quarter saw more departures than arrivals to these funds. However, that point isn’t as ominous as it appears because some giants in the asset management industry remain committed to ESG.
“At the same time, some of the biggest investment firms are expanding their ESG business. BlackRock, the world’s largest asset manager, said last month that its sustainable long-term flows have been positive every quarter since the beginning of 2022. BlackRock now manages almost $700 billion of sustainable strategies on behalf of clients, up from $200 billion in 2020,” according to a Bloomberg article on the subject.
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