How Did You Get It So Wrong?
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ESG: Conceptually Simple, But Simply Complex
“ESG” has become an esoteric buzzword, but what does it really mean and how should we think about in the context of our investing?
Each of us has a moral compass, and it stands to reason that there are some investments that we will avoid because it violates our sense of right and wrong.
For example, illegality aside, we all know that there are huge profits to be had from the narcotics trade, but we have no desire to pursue such opportunities because they are morally wrong.
It is for this reason that I would suggest that ESG is very nuanced and needs to be tailored to each investor.
Said differently, there is no “one-size fits all” when it comes to ESG.
However, the approach being taken to ESG investing by asset managers, and to some extent by corporate entities, is based on a one-size fits all assumption.
By definition, investing is opinionated and exclusive to each of us.
Some people accept that anthropogenic greenhouse gas emissions are an existential threat and so will have an aversion to oil companies that produce hydrocarbon fuel. Others form a view that global warming is no big deal and so are happy to invest in oil majors.
The Russian invasion of Ukraine has certainly put ESG theory to the test. The arms industry has been shunned by the ESG crowd on the basis that it costs lives. But is there not a counter view that the…
