On the surface, it’s been a huge success. Last year, financial institutions representing $130 trillion in assets committed to cutting their greenhouse gas emissions. And everyone from BlackRock Inc. to Deutsche Bank AG to HSBC Holdings Plc now says ESG is crucial to their business.
Clements-Hunt said he welcomes growth, but he also sees parallels to the dot.com bubble and the overheated mortgage market that proceeded the global financial crisis in 2008.
He isn’t the only skeptic. Jerome Dodson, the retired founder of Parnassus Investments — the biggest firm dedicated to ESG — in January described the boom in ESG as “disconcerting.” Last year, Matt Patsky, who runs one of the world’s oldest socially responsible investing firms, Trillium Asset Management, referred to the sector as the “wild west” and ripe for a crackdown. And Tariq Fancy, BlackRock’s former head of sustainable investing, said that ESG funds are mostly about marketing and have little real-world impact.
The shakeout, when it comes, will lead to more “honesty in markets,” Clements-Hunt said. “Like any form of investment, if there’s lazy analysis and the eyes are too much on the money, then you will fail.”
This article was provided by Bloomberg News.