What the US Can Learn From Europe’s ESG Mistakes
The EU isn’t worried about wokeness, but it’s struggling to develop rules that would help investors avoid greenwashing.
ESG investing, you may have noticed, has become a political lightning rod in the US. To liberals, it’s slowing global warming and fighting social injustice. To conservatives, it’s spoiling the economy and the American dream. So is it saving the world or destroying it? Truth is, it’s doing neither. But left to its own devices, the lucrative ESG fund industry is doing a pretty good job at destroying itself.
Bloomberg Intelligence has estimated that global ESG investment could hit $50 trillion in 2025, triple the amount in 2014. But without a common definition of what makes for good environmental, social and governance investments, fund companies have been free to slap the ESG brand on just about anything. Trusting investors often put money toward companies they might otherwise wish to avoid. Even ESG adherents sometimes have a hard time defending the label, in part because of disagreement over what it’s supposed to measure.