“The preponderance of assets in ESG funds are in ESG light funds,” Johnson said. “The level of spiciness, if you will, goes from mild to medium to hot -- in terms of where the assets are right now, it’s all in pico de gallo.”

Raters Disagree
Complicating socially conscious investing is the fact the Securities and Exchange Commission doesn’t regulate how the ESG label is applied, though it’s considering adding rules for funds that call themselves ESG or sustainable.

Independent ESG rating companies around the world have sprung up to fill the gap. But they don’t always see eye-to-eye. A 2019 paper from MIT Sloan School of Management found the correlation of five raters’ ESG scores averaged 0.61, compared with a 0.99 correlation of credit ratings from Moody’s Investor Services and S&P Global Ratings.

Differences can arise in weighing a company’s overall actions. Amazon.com Inc., for example, has been accused of dangerous warehouse practices, but has pledged to become net carbon neutral by 2040.

Bloomberg LP, the parent of Bloomberg News, is developing an ESG scoring system. And Bloomberg Intelligence analyzes climate change funds by looking at their carbon exposure.

“The question on everybody’s mind now revolves around green washing,” said Shaheen Contractor, ESG analyst for BI, referring to company efforts to create an undeserved image of environmental responsibility.

That’s a concern for Dylan Tanner, executive director of InfluenceMap, an organization that provides data and analysis on how businesses are impacting the environment.

“Some of the data providers who rate companies on ESG tend to firstly rely on a company’s own disclosures and sustainability reports too much,” he said. “How meaningful those numbers are, when you’re blending climate with labor, should be questioned.”

Get on Board
Issuers have realized the benefits of ESG branding. At least eight funds have relaunched this year to switch to the strategy, versus a maximum of two in previous years, according to data compiled by Bloomberg Intelligence.

There have been 17 ESG ETFs launched so far in 2020, compared with 10 in all of 2019. And the inflows keep coming. ESG funds have already taken in almost $4.1 billion in October, on track for their best month since at least 2013.