You know that Your Survival Guy is not a fan of ESG investing. It seems like a scheme that preyed on investor sympathy and so-called feel-good investing without results while generating higher fees for fund managers. The new fees were the main feature, as most of the funds are slightly altered index funds with pro-ESG weightings that seem to underperform the market. Andy Barr and Jay Clayton explain at The Wall Street Journal:
If you invested your 401(k) in an environmental, social and governance fund, chances are your account underperformed. Worse, your investment probably didn’t affect the problems ESG aims to fix. This failure in both financial performance and societal benefit was forecast by many market professionals, yet over the past decade middle-class investors, with the encouragement of many in positions of authority and influence, poured hundreds of billions of dollars into ESG funds. This misguided strategy provides a cautionary tale of emotion, politics and profit overriding sound investing and regulatory principles.
ESG investing has the same dangerous alignment of interests among politicians, regulators, financial institutions and fee-generating intermediaries that drove the housing bubble and resulting 2008 financial crisis. Many progressive politicians embrace ESG investing in the same way that more than a decade ago they embraced runaway mortgage debt, fueled by Fannie Mae and Freddie Mac, to champion homeownership. By forcing ESG investment practices on investors, progressive politicians can claim to voters that they are promoting environmental and social responsibility without taking any responsibility for the costs or effectiveness of shifting investment dollars.
Action Line: BlackRock was the chief promoter of the ESG trend, and while he worked there, Vanguard’s new CEO, Salim Ramji, embraced the strategy wholeheartedly. That lack of awareness regarding what seems like a conflict of interest between fiduciary duty and ESG investing should give anyone pause if they are considering employing big money management firms. Read more about the problems at Vanguard in my free SPECIAL REPORT: The Trouble with BlackRo… er… ummm, Vanguard.
Originally posted on Your Survival Guy.
