Apr 18, 2022
BNN Bloomberg recently published insight featuring Andrew King, Professor of Strategy and Innovation, discussing a recent study investigating the performance of ESG (environmental, social, and governance-focused) investment funds.
After interviewing more than a dozen investment professionals to investigate their claims that a focus on ESG produces higher profits, signals higher stock returns, lowers capital costs, and benefits from investment flow, Andrew and his coauthor concluded that,
“The logic and evidence for assurances of ESG-driven alpha are lacking. Indeed, it is our best guess that flows of money into ESG funds represent a marketing-induced trend that will neither benefit the planet nor provide investors with higher returns.”
Over the past decade, ESG funds have had mixed results, generally failing to outpace the broader market. However, ESG managers and advocates note that the strategy of these funds aims to deliver long-term value, and that all investment styles have stretches of underperformance.