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The era of ESG

Investing in companies with ethical and social goals is a major market trend – even to the detriment of asset allocation principles
The era of ESG
  • ESG investing is fuelling a lot of investor decision-making
  • Estimates suggest that 50 per cent of all European passive funds are likely to be branded as ESG by 2025
  • Investors must be on their guard for stock market mania

There is little doubt that environmental, social and governance (ESG) concerns are now a major influence on investor thinking. With 50 per cent of all European passive funds likely to be branded ESG by 2025, according to Morningstar, there is an imperative for companies to appeal to ethically-conscious investors and consumers in order to stay on the radar.

But the problems with ESG investing are amply demonstrated by a simple search for the FTSE 100 companies with the highest ratings on ethical and social matters. According to data from Refinitiv, the top five companies include pharma giants AstraZeneca (AZ.) and GlaxoSmithKline (GSK) – plausible – miner Glencore (GLEN) – quite a few skeletons here, admittedly - and British American Tobacco (BATS) – no further comment needed. 

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