Greg Wait featured in Marketwatch.
Sustainable investing is hot, and when Wall Street sees a trend, it wants a piece of the action.
How hot? In 2020, US SIF Foundation, which measures this type of investing, said 33% of U.S. assets under professional management use environmental, social and governance criteria when investing. That’s $17 trillion, or one in three U.S. investing dollars.
No wonder fund issuers are furiously trying to capture those dollars. Morningstar said in July that 25 funds with sustainable mandates launched in the U.S. in the second quarter of 2021, the second-highest number ever issued. As of June 30, there were 437 open-end mutual funds and exchange-traded funds dedicated to this investing style, according to the research firm.
How do you know if your fund is really an ESG fund or just a green marketing ploy? Roll up your sleeves, as more than any other investment style, ESG requires you to know what you want, what you’re willing to pay and what the fund will deliver.
ESG investing adds a layer of squishiness to traditional financial analysis because the heart of it is investing according to your values, and everyone’s values are different. What’s greenwashing to me might be fine for you. It’s much more nuanced than buying a low-fee fund that tracks the S&P 500 index SPX, -0.11%.
Here are eight questions to ask yourself so you can decide whether an ESG fund is legit or is just greenwashing.
