Good Intentions Take 3rd Place to Profits and Scams


            Nairobi            Scanning a copy of The Financial Times that I picked up as I hustled through the Frankfurt Airport, I stumbled onto another drumbeat in the chorus of reversals hitting the concept of social investing or ESG, environmental, social and governance screens for big money funds and progressive punters trying to make change for their cash.  This article highlighted action by the United Kingdom’s Financial Conduct Authority.  The FCA came out strong, banning any “vague references to ‘sustainability’ to market their funds and new greenwashing rules that could lead to a shake-up of the $250 billion sector.”  Turns out the London City hucksters are no different from the fast buck suit-and-tie scammers on Wall Street, always willing to put lipstick on a pig, if brings in more money and fees.

There’s worse news for this type of progressive investing in the US.  The Wall Street Journal leads with the bottom line, arguing that “weak returns” are hammering these funds and their products.  Of course, there’s some irony to all of this, because supposedly the investors were willing to experience more modest returns in exchange for the additional benefits their investments might be making.  Inflation raises its head, interest rates go up, war and mayhem gut a lot of clean energy stocks and initiatives, and it turns out that we reached the bottom-line definition very quickly of how to define “more modest.”  In reality, too many funds were selling a wish dream that investors could have their cake and eat it, too.  Use their money for social goods and make bank at the same time.  Win-win.   It’s not dead, but as the Journal notes, in the recent quarter more of these types of funds closed, than opened, according to financial observers.

Some investors wilted as well, as red states made this part of their litmus test of right-wing rage.  Louisiana barred public investment or bids from banks not handling oil and gas expansion.  Florida saw this as part of their “woke” war.  Others followed.  On Wall Street, if money is not flying off the shelf in their directions, they’re toast, no matter what it might be.  As I’ve pointed out before, most of these funds were as much scam as sustainable and some of the investments were deep in the wrong direction, so they were never affairs of the heart and principles, but all about the cash, until they aren’t.

Furthermore, another cloud, similar to the one in the UK, may have influenced some of these closures as well.  As the Journal also reported, “…the SEC is policing the space more closely.  In September, Deutsche Bank’s investment arm, DWS Investment Management Americas, agreed to pay $19 million to settle an investigation into alleged greenwashing by the firm for overstating how the company factored ESG data into investment decisions.”

Truth in advertising still matters.  Many on Wall Street probably decided to close shop before they had to pay the piper.  Good intentions have huge value, financial and otherwise, but add Wall Street and London City in the mix, and there’s going to be mess.