“As the war in Ukraine rages, finance professionals on Wall Street and in Europe recently attracted outrage by suggesting that investing in arms manufacturers should be treated as ethical investing.

In the fight against tyranny, they argued that such an investment ‘preserves peace and global stability’ and defends ‘the values of liberal democracies’. As such, it belongs in the increasingly lucrative investment category known as ESG or environmental, social and governance…

Unfortunately, the label is not currently worth the paper that it’s written on – and not only because of the controversy over defence contractors. My recent research shows that this completely undermines ESG’s potential as a force for good. As we shall see, however, regulators are at least making moves in the right direction.”

[COMMENTARY]It was inevitable that the ESG ‘label’ would be abused in various ways. Advisors, ethical and sustainable investors, need to do their homework. New regulations and reporting standards will help. However, it’s still buyer beware!
Green investing: the global system for rating companies’ ethical credentials is meaningless, by Marc Lepere, King’s College, March 23, 2022, UK.