, Columnist
The Cost of an Investment Conscience
There's a case for ethical investors to welcome lower returns as proof of their impact.
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It seems logical that so-called ethical investing comes at a cost. If an investment fund restricts the universe of shares it's willing to buy for good moral reasons, it's likely to miss out on some stellar opportunities. But what if those lower returns are actually a desirable consequence of environmental, social and governance policies, rather than an unhappy side-effect of investing with a conscience?
That's the argument made by Cliff Asness, the billionaire co-founder of AQR Capital Management, which oversees more than $180 billion. In a report earlier this month, he made the case that lower returns are a necessary condition of adopting ESG constraints: