business news in context, analysis with attitude

The Financial Times reports this morning that the US Securities and Exchange Commission (SEC) "is poised to crack down on exaggerated environmental, social and governance credentials in investment products, preparing standards for a sustainable funds industry that has boomed to almost $3 trillion … Rules being prepared by the Securities and Exchange Commission would specify disclosures to be made by investment funds that have terms such as 'ESG,' 'sustainable,' or 'low-carbon' in their names. The rules are expected to require information about how ESG funds are marketed, how ESG is incorporated into investing and how these funds vote at companies’ annual meetings, according to people familiar with the SEC’s thinking."

KC's View:

Good.  I think there are a lot of companies out there that are making ESG claims that will fall apart when put under any sort of scrutiny.  As they should.

I know there are people out there who decry some companies' emphasis on ESG and other social/cultural issues, arguing that they should focus solely on shareholder value.  There even are some billionaires out there launching funds designed to invest solely in such bottom line-centric companies.  Which is an entirely reasonable argument - if you want to put your money (whether as an investor or as a consumer) behind such companies, that's up to you.  But if others want to support companies with a more holistic/nuanced view of how to do business, well, that's okay too.

But it is important to know which companies are getting right, and which companies are faking it.