Let’s say you like to invest according to your conscience and believe in the sustainable or ESG movement that scores companies based on how well they adhere to environmental, social and governance principles. Would you invest in Total S.A.—the French oil and gas company? How about steelmaker Commercial Metals Co., which consumes lots of resources to make its finished products? Or even Mattel Inc., which has produced countless plastic toys in its long history?

ESG purists would likely thumb their nose at these companies, but they appear in certain ESG-focused strategies and fund portfolios. And that pretty much sums up the quandary of what exactly is meant by the trendy buzzwords of sustainable and ESG investing, along with impact investing and SRI, which can mean either socially responsible investing or sustainable, responsible and impact investing.

No matter what it’s called, this slice of the investment world is clearly gaining momentum among both institutional and retail investors. Financial industry A-listers including BlackRock, State Street Global Advisors and Goldman Sachs, among others, have made sustainable investing a priority. And much has been made about generational and gender-driven attitude shifts in investing, with millennials and women as leading forces behind the growing focus on ESG principles.

According to Morningstar, the sustainable funds universe comprised 303 mutual funds and exchange-traded funds in 2019 across three broad types: ESG focus, impact/thematic and the sustainable sector. And the fund research company said that $21.4 billion poured into sustainable funds in 2019, a nearly fourfold increase over the prior year.

Still, the $140 billion in ESG assets at year-end was less than 1% of the total assets in U.S. mutual funds and ETFs. But that also means there’s plenty of room for growth.

In a report, Morningstar analyst Jon Hale noted that two overarching issues have helped fuel the growth in sustainable/ESG investing. “The first is climate change, and the second is the growing critique of the shareholder-primacy view of the corporation,” he wrote. “Now, rather suddenly, we seem to have reached a tipping point on both issues.”

The International Monetary Fund explained in a report from last October that concerns about risk management, benchmark underperformance and a need to demonstrate material ultimate impact led to the evolution of ESG strategies away from negative screening that excluded firms or entire sectors from investment portfolios, and more toward positive screening for companies with good ESG performance.

The IMF report gave a wishy-washy conclusion about the investment performance of ESG-related funds, stating that there’s no conclusive evidence that sustainable funds consistently outperform or underperform conventional funds. It noted that restricting investments can reduce diversification benefits and limit investment opportunities, leading to underperformance. On the flip side, it posited that ESG factors could allow asset managers to identify companies with higher long-term-value creation while avoiding assets with mispriced costs from extreme events like climate change.

Morningstar has a more upbeat view regarding performance, noting that 35% of sustainable funds that it covers finished in the top quartile of their respective investment categories last year and 66% were in the top half. At the very least, that paints a picture that investors don’t have to take a hit when they try to do good for the planet, society and corporate governance.

But one of the criticisms of ESG-style investing is the lack of clarity about what sustainability or ESG means, let alone how to measure it. In early March, the Securities and Exchange Commission issued a request for comment on a standing rule aimed at eliminating misleading fund names by requiring at least 80% of a fund’s holdings to match the stated investment objective of the fund’s name.

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