Climate activist, Greta Thunberg, has on various occasions
lashed out at global leaders for "empty" and
"beautiful" words that she considers do not translate to
meaningful action on climate change. Most recently at COP-26, Ms
Thunberg sought to paraphrase the pronouncements of certain
politicians as "blah blah blah", and spoke of the failure
of governments to implement climate change strategy.
Whether or not you agree with Ms Thunberg's political views on
government actions regarding emission reductions, there can be
little disagreement in respect of the pace of growth in private
sector interest and investment in ESG funds. The data is
irrefutable: US sustainable funds saw $15.7 billion in net inflows
during the third quarter of 2021, according to Morning Star with
assets in these funds totaling more than $330 billion as of
September. According to Bloomberg, Global ESG assets are on track
to exceed $53 trillion by 2025, representing more than a third of
the $140.5 trillion in projected total assets under management.
Further, more than half of the environmental, social and
governance-linked funds in the market outperformed the S&P 500
in the first several months of 2021.
Although the reasons for the growth and performance of ESG products
are the subject of vigorous debate, the data is conclusive in
relation to the surge of interest in funds being raised with an
environmental or social purpose.
This begs a question: How do statements of intention around the
environmental purpose and social objectives of a fund translate
into action? When an offering document states that the purpose of a
fund is to advance environmental and social goals, how can
investors be certain that the fund will, in fact, deliver on its
promise?
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