Page 26 - BusinessWest March 20, 2023

ESG Investing
It Pays to Have a Healthy Dose of Skepticism
BY JOSH BEDELL, CFP, CIMA AND SYLVIA CALLAN, CFA
“Some mutual
funds and portfolio managers have taken to slapping an ESG title on a fund or portfolio without doing much
of anything to truly incorporate ESG factors into the investment process. This practice of attempting to woo well-intentioned investors, while not actually striving for change, has even earned a sardonic title: ‘greenwashing..’”
As with any new investment trend, a rise in popularity can give way to bad actors.
ESG (environmental, social, and gover- nance) investing is not immune. Recent articles from the Economist, Barron’s, and the Wall Street Journal focus on the rise of ESG investing, and the perhaps predictable attempt by some to capitalize on this trend in a disingenuous and unscrupulous manner.
However, they leave investors who are socially conscious without a way forward in seeking to decipher the good from the bad.
The need couldn’t be more pressing, with ESG investing slated to rival traditional forms of invest- ing in the next several years. With this potential surge in demand, concerns have arisen about how seriously the ESG criteria are being considered.
Indeed, some mutual funds and portfolio man- agers have taken to slapping an ESG title on a fund or portfolio without doing much of anything to truly incorporate ESG factors into the invest- ment process. This practice of attempting to woo well-intentioned investors, while not actually striv- ing for change, has even earned a sardonic title: ‘greenwashing.’
The good news is that the SEC has taken notice, and has proposed some rules that would create consistent standards and disclosure
requirements. In addition, the Principles for Responsible Investing (PRI), a globally recognized institution for sustainable investing, tracks the development of regulatory policies in sustainable finance that support ESG investment principles. Over the past year alone, the PRI identified more than 200 new or revised policy instruments that support, encourage, or require investors to con- sider long-term value drivers in ESG — the main elements of socially responsible investing.
Understanding the evolving landscape in ESG can feel like a daunting task, especially if you have many other things on your plate, like a job, family, and normal day-to-day responsibilities. The good news is, there are some relatively easy steps inves- tors can take to ensure their portfolio aligns with their values.
For starters, mutual-fund families that focus exclusively on ESG and/or socially responsible investment (SRI) funds are more likely to utilize stringent criteria than a traditional fund family that has added one or two ESG funds in recent years. Further, actively managed funds, which incorpo- rate at least some degree of qualitative analysis,
ESG
Continued on page 29
JOSH BEDELL
SYLVIA CALLAN
>>
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Principal Financial Advisor 413.297.6074
26 MARCH 20, 2020
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