ESG Will Endure Despite 2022 Performance

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Mahatma Gandhi once said, “First they ignore you, then they laugh at you, then they fight you, and then you win.” The environmental, social, and governance (ESG) investment community is deep within the third stage. ESG investing has been subjected to brutal headlines, politically motivated attacks and editorials from many market and political pundits in investment news outlets such as the Wall Street Journal, Barron’s, The Economist, the Financial Times and others over the first half of the year.

These headlines have called for the implosion of the “ESG bubble,” declared 2022 the year of ESG pushback, and even include Elon Musk tweeting out that “ESG is a scam” after Tesla was removed from an ESG-focused index.

Some of the attacks on ESG are warranted, especially given the confusion or misinformation regarding the definition of ESG investing, what falls under the ESG umbrella, and even the lack of consistency from ESG ratings firms.

While many investment firms prefer the term “sustainable investing,” ESG has become the acronym that stuck in the press and has been widely adopted, although there is plenty of differentiation under the broad ESG umbrella. To help clear up the confusion, here are a few quick definitions of what falls under “ESG” – as both an input to and objective of the investment process.