We reached out to leading experts in SRI to find out their responses, and this is what we found…
QUESTIONWhy does the term ESG create a problem for so many?
ANSWERMichael Poisson, Managing Director – Ideal Ratings
ANSWERFear. When it comes to the term ESG, people may fear it for a variety of reasons that are often rooted in their own beliefs, values, or concerns. For some it’s simply their uncertainty or lack of familiarity of just what ESG is, for others, there is a perception of overreach or intrusion into their personal values or freedoms, while some are skeptical of the impact or effectiveness of addressing ESG issues for others it is simply a threat to their political or ideological differences.
ANSWERIt’s important to acknowledge that fear or skepticism surrounding ESG is not uniform, and individuals’ concerns can vary widely. Engaging in open dialogue, providing accurate information, and addressing these concerns can help foster a better understanding of ESG and its potential benefits.
QUESTIONWhy does the term ESG create a problem for so many?
ANSWERCharles Hamowy, CPA/PFS, CFP®, Editor In Chief – The Socially Inspired Investor
ANSWEROne of the main criticisms of ESG investing is that it is too focused on social and environmental issues and not enough on financial performance. Some investors argue that companies that prioritize ESG factors may be sacrificing financial returns in order to meet social and environmental goals. This can be particularly problematic for investors who are primarily focused on maximizing their returns and may not be as concerned with social or environmental issues.
ANSWERAnother reason why some people are mad at ESG is that they believe it is too subjective. ESG ratings are often based on a variety of factors, including a company’s environmental impact, labor practices, and corporate governance. However, different ESG rating agencies may use different criteria to evaluate companies, which can lead to inconsistencies in ratings. This can make it difficult for investors to compare companies and make informed investment decisions.
ANSWERFinally, some people are mad at ESG because they believe it is too politically motivated. ESG investing often involves taking a stance on social and environmental issues, which can be controversial. For example, some investors may choose to divest from companies that are involved in the fossil fuel industry or that have poor labor practices. However, this can be seen as a political statement rather than a financial decision, which can be off-putting to some investors.
