In case you’re not aware, ESG stands for “environmental, social, and governance.” It’s essentially Wall Street’s way of describing “investing for a cause” or “do-gooder investing.”
In September 2018, DWS wrote a report about investing responsibly under this basic ESG framework. The company claimed to be a responsible investor for the previous 20 years.
Apparently, the German authorities disagree.
Now, it might seem like this battle doesn’t involve you. But don’t let the problems in the ivory tower fool you... Individual investors face this problem every day.
Unfortunately, it’s not just about DWS. Many funds aren’t quite what they claim to be. And in the end, these misrepresented ESG funds can chew up investors’ gains for no reason.
For those unfamiliar, ESG investing is a fad in the investing world.
The idea is that investors can choose to only invest in ethical companies. And as I noted earlier, this approach spans three different categories – environmental, social, and governance.
ESG investors intend to invest in socially “responsible” companies. And they want to avoid the “irresponsible” ones.
Question: How do we determine which company is socially “responsible”?
Are the oil and gas producers considered socially responsible? Are Defense companies? Or are only renewable energy and Electric Vehicle companies socially responsible? Who gets to decide?
‘It’s essentially Wall Street’s way of describing “investing for a cause” or “do-gooder investing.”’
I think they already had a term for that. Oh yeah, it’s “fiduciary negligence”.