Saturday, September 18, 2021

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    Sustainable investing faces the beginnings of a backlash

    NSINCE TIME Since time immemorial, the investment industry has sought to turn money into more money. This is not an easy trick. Therefore, those who do it well will be rewarded. The complexity of choosing the assets you own (rich world stocks or poor government bonds, office blocks or orange juice futures) contrasts with the simplicity of determining the success of those investments. The winner is, roughly speaking, the one who catches the most marbles while minimizing the risk. The fact that the money in question helped build a company and kept the government running seems to be mostly associated with the movement.

    This approach is starting to feel old-fashioned. More savers want a better idea of ​​what their money is doing. What if their cash could be used to both generate pensions and improve the state of the world? The broadest “sustainable” investment fund will manage $ 35 trillion in assets in 2020, and the industry association Global Sustainable Investment Alliance believes it has increased from $ 23 trillion in 2016. Equity and bond issuers cannot ignore favorable investments. Banks are increasingly refusing to lend to companies with poor environmental, social and governance impressions (ESG) Credentials. A growing number of consultants are assessing whether their bosses are making small efforts to combat climate change and social inequality.

    Savers can immerse themselves in the feeling that their money is moving capitalism in the right direction, but they are still making a profit. However, the new approach is prompting the first signs of repulsion. The answers to two offensive questions remain elusive. Perhaps a noble fund is properly investing in a noble company? And are these financial well-meaning people trying to get rid of even such good ideas?

    Start with whether money is supposed to be chasing ESGFriendly investment has achieved the right goals. Regulators have doubts. US Securities and Exchange Commission (SEC) Wants to crack down on “greenwashing” funds that show off their good qualifications, but can’t prove that they’ve done the legwork needed when choosing an investment.

    On August 25, the following report was made. SEC And that German correspondent DWS, Germany’s leading asset manager, which boasts its sustainable advantage, misleads clients about how much it has used ESG A metric for putting money. This happened after a former sustainability officer questioned the claim that half of the fund’s assets were invested in ways that went beyond mere profits.

    The company denies cheating. However, industry practitioners acknowledge that there are so many variations in sustainable investment that savers can be confused. Choosing a company to invest in is often just a box-checking exercise to ensure that the right grade of recycled paper was used to publish the annual report. The impetus to improve disclosures in Europe, the most enthusiastic place for favorable investment, led funds defined as $ 2 trillion contracts sustainable between 2018 and 2020. bottom.

    As the industry matures, the twist on the indicators may disappear. But that doesn’t help with the second, deeper criticism. In short, investors who seek good intentions deceive themselves at best and, in the worst case, do more harm than good. This is a discussion in a blog post published on August 20 by BlackRock’s former sustainable investment tycoon Tariq Fancy. ESG The investment simply “answers the inconvenient truth with a useful fantasy,” he says.

    Fancy points out that the investment industry is selfish because of all the violations of its virtues. Monitoring a company’s pledge to be a better citizen gives the asset manager the opportunity to charge high fees. And for all the dissatisfied investors who sell the company’s stock, he claims there is another to buy it.

    Even if the new approach fine-tunes the cost of capital of a company (for example, by increasing investment in solar companies and decreasing investment in oil giants), this means that businesses will be affected by climate change, racism, etc. It only encourages the dangerous illusion of being able to lead the battle. .. And if anything, Mr. Fancy believes that government action delays the day when such issues are actually dealt with.

    What does this all mean for savers and their cash pots? Knowing what the company is doing is not a bad thing, but you may also need to monitor your funding.Prioritization CEOHer statement on Black Lives Matter on the feasibility of her investment plan is a recipe for low returns and instability in the corporate sector. And it won’t move enough to derail the capitalist model.

    For a more professional analysis of the biggest stories of economics, business and markets, Sign up for MoneyTalks, Weekly newsletter.

    This article was published in the printed version of the Treasury and Economy section under the heading “Profit and Dross”.

    Sustainable investing faces the beginnings of a backlash Source link Sustainable investing faces the beginnings of a backlash

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