ESG investing is all the rage, but it has its limitations. Passive funds prevent real change by creating a stagnant environment that doesn’t encourage change, just look at how much C02 has increased despite all of the ESG inflows, or greenwashing where companies appear to be more environmentally servicing than they necessarily are. Active ESG investing (AESG) could be a game changer because it can rely on qualitative analysis and trends of a company to select them in an ESG fund rather than a gameable statistic. Additionally, active funds can have a bigger impact on diversity in board selection because it can have real corporate accountability rather than once again hitting a target statistic. Active funds can also put together better incentive structures to bring more companies into the ESG fold.
FINSUM: AESG funds is the logical evolution of standard ESG by merging two booming subsectors, and this is the time for active fund outperformance given ultralow yields.