(September 2020)

Anyone who has invested in ESG will be well aware that under the surface, things can get quite murky. Most ESG funds—especially ETFs—hold stocks that many would never consider to be “green”. For example, oil and utilities companies. Therefore, it is important to understand that ESG ratings vary widely and are provided by a number of companies. This means that even funds who don’t advertise as being ESG-focused often have high scores (for example, see XLU, the popular utilities sector SPDR). Generally, there are three types of ESG funds: ESG-focused funds which use ESG as part of their security selection, impact funds that invest with a certain ESG goal in mind, and ESG sector funds. The first group is the largest by far.

(New York)

FINSUM + Magnifi: ESG is an area where significant due diligence is necessary because of a combination of very weak regulations and a wide variety of ratings and methodologies.


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