Investment decisions should be based on maximizing the individual investors’ returns, both purposeful and financial. Unfortunately, more and more investors have unwittingly or unwillingly fallen prey to doing what’s in the best interest of others rather than making the best decisions for themselves.
These investment options have become one of the asset management industry’s fastest-growing investment products as well as sources of revenue, referred to as Environmental, Social and Governance. Known colloquially as “ESG,” these types of investments involve, according to Forbes, “investing in companies that score highly on environmental and societal responsibility scales.” Examples include considerations of a particular company’s carbon footprint or the diversity of its board of directors.
In just a few years, ESG has taken the investment world by storm. It’s been lauded by the likes of BlackRock CEO Larry Fink, who in his recent annual letter declared that planning for a “net-zero” future is an important part of creating “durable returns for shareholders.”
We don’t necessarily disagree with many of the goals of ESG, but the problem Mr. Fink and other proponents of ESG fail to see (or just ignore) is that companies and asset managers are implicitly expected to support ESG and invest accordingly. Otherwise, they’re likely to face the tedious task of dealing with the ruling class of social justice warriors who dominate the discourse.
