(New York)

Any advisor likely already knows it, but it is worth repeating: ESG funds are troubling space. They are significantly more costly than traditional funds, have middling returns, and perhaps worst of all, these days they seem quite undifferentiated from conventional funds. One of the big problems in the space is that there is no universal definition of ESG or standard convention for defining ESG risks or parameters, so anyone can call anything “ESG”. For example, take a look at the top ten holdings of two funds, one a basic S&P 500 tracker, the other labeled “Large Cap ESG”, and you will see they have virtually no differences except that the ESG fund costs 40 bp at best and the conventional fund costs 9 bp.

FINSUM: Some people call ESG a pure marketing scam. To some extent that is true as it is pretty easy for fund providers to take advantage of ESG pricing without really doing anything under the hood. But at the same time, there is also genuine interest on the consumer and provider sides to expand opportunities in the space.