ESG Investing

September 27, 2019 • Volume 29, Issue 34
Do socially responsible funds pay off for investors and society?
By Charles P. Wallace

Introduction

Investments that seek to improve society and hold businesses to high standards of conduct are becoming a growing force in the United States. These socially responsible investments — also known as environmental, social and corporate governance (ESG) investments — reached $8.9 billion in the first half of 2019, surpassing the 2018 total. ESG investing is especially popular with Millennials worried about climate change and companies' treatment of workers. But critics say the term is hard to define and that its potential to revolutionize the financial services market is overblown. They also argue businesses' primary role is to make money for shareholders, and that building profitable companies ultimately benefits society. Still, ESG investing is gaining favor with socially conscious investors and with companies that believe corporations have a responsibility to both make money and help society. Economists are debating whether ESG investing makes sense for shareholders, but some recent studies have found that incorporating ESG criteria into investment decisions can pay off for companies and investors alike.

Young climate activists protest outside the United Nations in New York City on Aug. 30 (AFP/Getty Images/Bryan R. Smith)
Young climate activists protest outside the United Nations in New York City on Aug. 30. Millennials concerned about climate change and other social issues are helping to drive interest in socially responsible investing. (AFP/Getty Images/Bryan R. Smith)
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