Regarding Burton G. Malkiel’s “‘Sustainable’ Investing Is a Self-Defeating Strategy” (op-ed, Sept. 19): ESG funds—funds that allow investors to focus on environmental, social and governance issues, as well as on performance—are indeed having positive impact on both the greater social good and on investors’ bottom lines.
Expense ratios on ESG funds have plummeted in recent years as the funds have gained popularity, and most have more than enough diversification to eliminate any nonsystemic risk. The Vanguard ESG U.S. Stock ETF (ESGV) has a net expense ratio of 0.12%, and holds 1,478 stocks. The iShares ESG Aware Agg Bond ETF (EAGG) costs 0.10%, and holds 2,497 bonds.
More studies on ESG funds have found overperformance than underperformance, although ESG funds haven’t been around long enough to say anything conclusive. ESG funds might choose to shun one or two value sectors, such as Big Oil, but that still leaves many other value sectors available for ripe picking.
Not all ESG raters or fund managers agree on what constitutes a positive ESG investment, true. But just because the reviews on Yelp and Tripadvisor may not agree what restaurants are the best, that does not render them useless. ESG “reviews” similarly help ensure that managers maintain robust ESG strategies and reporting.
Consider Unilever—a “darling” of many ESG fund managers. It has committed to halve the environmental impacts of the making and use of its products by 2030, while continuing to grow its business. It has made progress on packaging waste, water and greenhouse-gas reductions as well as sustainable sourcing of its main commodities, and its profits have soared.
