March 31, 2021
This is a comment not about disclosure standards for public companies but for investment products. It seems that the term \"ESG strategy\" is a misnomer and that the term \"ESG-aware strategy\" would be more appropriate. A I understand, \"ESG\" portfolios are constructed by selecting companies whose stock the portfolio manager believes will perform well -- based on traditional financial metrics (earnings, return history, balance sheet, etc.)-- and then applying a \"filter\" to that list that screens out companies with an ESG score (e.g., SP, Sustainalytics) below a certain level. The portfolio manager is not an ESG specialist per se, in the way that a PM focused on Technology or Healthcare companies would be a specialist in those industries. I think part of what makes ESG a difficult nut to crack is that it is still not clear whether ESG, in and of itself, is a source of competitive advantage, although it is certainly an societal and environmental advantage. So in short, I think investment product developers should be thoughtful when marketing such products as something other than than \"ESG-aware.\"