This Former BlackRock Executive Says ESG Investment Model Is Broken
Spurring alternatives to coal-fired plants is a goal of ESG investing.
This Former BlackRock Executive Says ESG Investment Model Is Broken
By Angel Au-Yeung, The Wall Street Journal! Nov. 12, 2022 2:10 pm ET
Spurring alternatives to coal-fired plants is a goal of ESG investing.
Photo by Andreas Rentz/Getty Images
Terrence Keeley had been at BlackRock BLK +1.97% for about a decade when he reached a contrarian conclusion: ESG doesn’t work.
Keeley spent much of his time at the asset manager overseeing a group that nurtured relationships with central banks, finance ministries, family offices, and sovereign-wealth funds. Under pressure from politicians and activists, some of these investors were looking to distance themselves from companies that fall short on environmental, social, and governance factors. BlackRock (ticker: BLK) obliged, helping clients funnel money toward companies whose values they share.
Keeley said the strategy has proved to be neither a reliable generator of returns nor a real catalyst for change. In his new book, Sustainable: Moving Beyond ESG to Impact Investing, he argues that investors should shift money away from ESG indexes toward “companies with persistent environmental and social problems and engaging them to change.”
The ESG model—as an investment strategy and a driver of change—is still up for debate. Vanguard Group researchers found no significant difference in returns between ESG and non-ESG funds over a 15-year period. Companies in ESG funds had worse compliance on labor and environmental rules than companies in non-ESG funds, a study from researchers at the London School of Economics and Political Science and Columbia University concluded.
A spokesman for BlackRock said in an email: “BlackRock’s clients choose to invest in many different ways, and we offer them a broad range of choices based on their individual preferences and goals.”
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