Safe to say, Professor Aswath Damodaran of New York University–often called the “Dean of Valuation”–is not a fan of ESG investing, or investing according to environmental, social and governance factors. In his latest salvo against the topic, he says, “I believe that ESG is, at its core, a feel-good scam that is enriching consultants, measurement services and fund managers, while doing close to nothing for the businesses and investors it claims to help, and even less for society.”
And the criticism only intensifies from there; in his concluding remarks, Damodaran writes, “I am convinced that there will soon be room for only two types of people in the ESG space. The first will be the useful idiots, well-meaning individuals who believe that they are advancing the cause of goodness, as they toil in the trenches of ESG measurement services, ESG arms of consulting firms and ESG investment funds. The second will be the feckless knaves, who know fully well the void behind the concept, but see an opportunity to make money.”
But we see one yawning gap in the professor’s argument. There’s a third group that Damodaran overlooks: investors who want to better incorporate E, S, and G data into their analysis and aren’t prioritizing “saving the world” in their investment holdings. This group is focused on valuation of its investments, rather than expressing its values in its investments–the latter being a secondary consideration to the former.
That’s not to…
