"It's leading to cynicism," says Terrence Keeley. That's the gist of his new book, Sustainable: Moving Beyond ESG to Impact Investing, in which the former BlackRock executive calls for institutional investors, including pension funds, endowments, and foundations, to move away from what he calls the "ESG industrial complex" and toward direct impact investing.
Instead, Keeley says, investors should focus on waste reduction, affordable housing, health care, renewable energy, and education, the Wall Street Journal reports.
"The understanding people have when they buy an ESG product is that it will perform at or in excess of the market, while simultaneously doing some kind of good," Keeeley says.
"And to the extent you want to have a positive impact on the environment, that means investing, not divesting."
ESG, he says, is "not living up to its promise."
For example, MSCI's ESG indexes have underperformed the broader indexes over the past five years, he says, and those funds invest only in companies in accordance with the Paris 2050 objective, like Amazon or Google.
"These are all genuine concerns," Keeeley says, "but the way we're going about it, combining those and building alpha-based products is senseless."
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