A few years ago, a guy with a famous last name who ran a socially responsible investment fund asked me to lunch. I was hesitant because I figured he was planning to yell at me for a column I had recently written: “Stocks Weren’t Made for Social Climbing.” I wrote, “Profits are the best measure of a business’s value to consumers—and to society.” Instead, he was quite pleasant, though while I ate, he complained that most other environmental, social and governance funds weren’t all that socially responsible compared with his—“not ESG enough.” I asked him what was in his portfolio, expecting Tesla or some oat-milk company. He answered, “ General Motors . ” OK then.


These days ESG is big business, with $2.77 trillion in “global sustainable fund assets.” The average expense ratio is 0.41%. And sure enough, apparently some funds aren’t ESG enough. Police in May raided the European offices of Deutsche Bank ’s DWS unit in an investigation of “greenwashing”—saying its investments were more sustainable than they were. The authorities claim, “We’ve found evidence that could support allegations of prospectus fraud.” In June the Securities and Exchange Commission announced an investigation into Goldman Sachs for claiming some of its funds were sustainable and ESG when they really weren’t. This is a fight over branding. What has the investment world come to?

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