Fund managers have long been eager to satisfy global investors’ appetite for assets that meet “environmental, social and governance” standards. But the ESG movement is facing a backlash — and not without reason. As Bloomberg News has reported, many of the promises made to claim ESG virtue turn out to be meaningless, and corporations issuing “green bonds” aren’t always very green. Former champions of the movement have been speaking out about weak or contradictory assurances, describing an industry more devoted to virtue-signaling than to real action.
The ESG sector does have questions to answer. Many funds are run in a way that will do little or nothing to advance the movement’s stated goals. Even at their best, these efforts are no substitute for wise government policy. Yet prudent ESG investing serves a useful purpose, especially in helping to finance the fight against climate change.