ESG is a feel good scam - Aswath Damodaran
According to Bloomberg Intelligence estimates, ESG assets are poised to
reach $41 trillion by the end of this year and exceed $53 trillion by 2025
He believes that ESG at its core, is a feel-good scam that is enriching consultants, measurement services and fund managers, while doing close to nothing for the businesses and investors it claims to help, and even less for society," Damodaran wrote in his blog.
He said as Russian hostilities in Ukraine shake up markets, the weakest
links in the ESG chain are being exposed, and a moment of reckoning is
arriving for the concept.
Amid concerns about climate change and social justice, ESG investing
is fast becoming the hottest investment theme globally.
On the outperformance of ESG funds in the last decade, Damodaran argued that almost all of the outperformance could be attributed to ESG's tech focus and sector concentrations. "As the market
has shifted, and ESG-based strategies are now underperforming, ESG investment fund managers are scrambling, trying to explain to clients why this is just a passing phase, and that good days are just around the corner."
The renowned academician predicts that once the components of ESG that
matter get priced in, ESG-constrained funds will deliver lower returns
than funds that don't operate under those constraints.
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