Are ESG ETFs just a marketing gimmick

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Last Updated on October 9, 2022 by Bitfinsider

ESG, which stands for environmental, social, and governance, is currently one of the most popular movements in the world of investing; nevertheless, some investors consider it to be nothing more than a gimmick.

Companies such as BlackRock, Vanguard, and Fidelity are pioneering a new category of funds known as ESG. These funds are invested in businesses that fulfill a set of predetermined requirements. Among other things, these objectives refer to standards on diversity, equity, and inclusion; pollution; carbon emissions; and data security.

However, attacks on ESGs have originated from a variety of sources. Recently, the Comptroller of the City of New York, Brad Lander, wrote a letter to the Chief Executive Officer of BlackRock, Larry Fink, requesting that the corporation improve its climate disclosures and produce a strategy to make a commitment to net-zero greenhouse gas emissions throughout its portfolio.

On the other side, officials affiliated with the Republican Party have said that BlackRock is avoiding investing in energy stocks. On Wednesday, the state of Louisiana made the announcement that it would withdraw $794 million from the funds managed by BlackRock, citing the company’s support of ESG investment practices.

A request for comment was sent to BlackRock, but they did not react right away.

According to a recent opinion piece published in the New York Times by Hans Taparia, a professor at the Stern School of Business at New York University, ESG investing can create incentives for companies to be more socially and environmentally cautious; however, many investors have the mistaken belief that their portfolios are helping the world when, in reality, ESG investing is designed primarily to maximize shareholder returns. Taparia wrote this piece.

An ESG fund that makes use of MSCI ratings contains almost all of the stocks that make up the S&P 500.

The opinion piece continued by arguing that Wall Street needs rating systems that are more demanding, particularly when businesses that have achieved high ESG scores have been condemned for contributing to environmental or social issues.

Ethical, social, and environmental (ESG) investing is “most definitely not a fake,” according to Arne Noack, head of systematic investment solutions for the Americas at DWS, who was a guest on the program “ETF Edge” on CNBC. According to him, the concept that underpins the approach is the idea that businesses should earn profits in ways that are both healthy and sustainable.

According to Noack, “what we mean by ESG investing is, to put it as simply as possible, the incorporation of publicly available data into investment processes.” “None of this is carried out in a covert manner. Everything is carried out in a very open and honest manner.


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