Environmental, Social, and Governance (ESG) investments have recently emerged as one of the hottest trends in the financial sector. That being said, this progressive movement is facing more and more criticism, as time goes on. Prominent media outlets like CNN and Yahoo Finance are increasingly exploring the fall of ESG.
The ESG movement had originally been driven by noble intentions and a compelling promise: investing to generate a positive impact on earth, a.k.a. sustainable investing. Since the introduction of the ESG concept in 2005 and up until recently, many companies have got on board and started reporting on their progress in this area. Indeed, more than 90% of S&P 500 companies (index components) now publish reports detailing their ESG efforts alongside their financial disclosures.
Unfortunately, various organizations and special interest groups have exploited this trend to serve their own agendas, giving rise to the practice of greenwashing.
So, what's next for ESG, and how can investors navigate this confusing landscape? A close analysis of the ESG phenomenon should shed some more light.