On November 30, 2022, we posted a blog titled “The ESG Conundrum“, that suggested that rising interest in ESG (environmental, social and governance) investments presented a challenge to prospective investors. With no clear definitions, we concluded that ESG was essentially what the portfolio manager said it was. We also questioned whether the pursuit of ESG criteria would affect performance and whether ESG focused portfolios could, typically with higher fees, match more traditional portfolio strategies.
In our blog, we noted that some ESG based funds materially lagged other, more diverse funds, particularly those with a significant energy focus. Now, following rising interest in ESG funds through 2022, Morningstar recently reported that 2023 saw a material level of withdrawals, due at least in part, to underperformance.
All of this suggests that investors should continue to seek to understand what they are buying and determine what fits their long-term financial (and other) objectives.
All comments and suggestions are welcome.
Walter J. Kirchberger CFA