Is Wall Street endorsing, or even dictating, a moral standard in the capital markets? Implications of the popularity of ESG (environmental, social, and governance) mutual funds and ETFs
Location
Bunch Library Multimedia Hall
Start Date
3-4-2019 3:05 PM
End Date
3-4-2019 3:20 PM
Publication Date
Spring 4-3-2019
Description
As we continue to witness a massive transfer of wealth in the U.S., investment banks are aggressively moving to meet client demands by creating “ESG Funds” that are tied to in-house or third-party rankings of corporate social responsibility (CSR) and sustainability. Such rankings are typically based on a proprietary due diligence process that generates a quantitative screening mechanism, allowing public and private companies to achieve a relative ESG score within a sector and/or industry. ESG metrics enable investment advisory firms to create broad-based or “targeted” funds that focus on general or specific social/environmental/governance screens, such as a company’s level of carbon emissions relative to its industry peers. As investors are allocating more capital to ESG funds, we ask “How has this phenomenon evolved and motivated firms within these funds to change behavior, seek or strengthen ESG scores, and ultimately signal compliance to their investors’ expectations of an economic and/or social return?”
Recommended Citation
Gonas, John, "Is Wall Street endorsing, or even dictating, a moral standard in the capital markets? Implications of the popularity of ESG (environmental, social, and governance) mutual funds and ETFs" (2019). enLightening Talks. 11.
https://repository.belmont.edu/enlightening/Spring_2019/multimedia_hall_spring_2019/11
Is Wall Street endorsing, or even dictating, a moral standard in the capital markets? Implications of the popularity of ESG (environmental, social, and governance) mutual funds and ETFs
Bunch Library Multimedia Hall
As we continue to witness a massive transfer of wealth in the U.S., investment banks are aggressively moving to meet client demands by creating “ESG Funds” that are tied to in-house or third-party rankings of corporate social responsibility (CSR) and sustainability. Such rankings are typically based on a proprietary due diligence process that generates a quantitative screening mechanism, allowing public and private companies to achieve a relative ESG score within a sector and/or industry. ESG metrics enable investment advisory firms to create broad-based or “targeted” funds that focus on general or specific social/environmental/governance screens, such as a company’s level of carbon emissions relative to its industry peers. As investors are allocating more capital to ESG funds, we ask “How has this phenomenon evolved and motivated firms within these funds to change behavior, seek or strengthen ESG scores, and ultimately signal compliance to their investors’ expectations of an economic and/or social return?”
