Can I make an ethical kill in the stock market? We asked an expert | ethical money

The notion of “sustainable investing” had a banner year in 2021. Aligning investments with climate goals (without fossil fuel companies, for example) promises good financial returns, while also benefiting the planet. But is it too good to be true? I asked Tariq Fancy, CEO of the nonprofit digital learning charity Rumie and former director of sustainable investing at investment firm BlackRock. Last year, Fancy publicly denounced sustainable investing as a “dangerous placebo that harms the public interest.”

I read a claim recently – from research led by Aviva and Make My Money Matter – turning your pension “green” is 21 times more powerful reduce its carbon footprint than to stop flying, become vegetarian and switching to a renewable energy provider combined.
That’s ridiculous. Our individual actions reduce real-world emissions. Selling shares in polluting companies does not mean that someone else buys those shares and owns those emissions.

But sustainable investing must be doing something well?
It is found, in specific corners of the market. But those are not corners that the average person can get into, usually with pensions. The proof is in the pudding. Green investment has increased tremendously, but emissions seem to be rising along with it. Since the 1980s, people have been beholden to a narrative that the free market will magically correct itself. But climate change is essentially a market failure and requires regulation. Investing in ESG falls into that trap.

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ESG investing: that’s a kind of sustainable investing involving the purchase of shares in companies with a good score for “environmental, social and governance”…
ExxonMobil used to have the same ESG score as Tesla! Because sheet music is a mixture of different things. ExxonMobil has good governance and a diverse board, so they’re good at “G” and “S” but terrible at “E.”

So when someone is investing in ethical or sustainable funds, they may find that they are investing in companies that would horrify them. how can this be OKAY?
There has been no regulation, although there is increasingly in the EU. It’s like organic fruit 30 years ago. If nobody controls what it is to be organic, someone who thinks that people will pay more will put the organic label.

Tariq, this all sounds a bit wrong.
The economy is structured according to what is profitable. That’s not because people are mean, but because of the way the system is designed. Fund managers have a legal obligation to focus on maximizing profits. And because they’re managing someone else’s money, you don’t want them thinking about values, because everyone has different values.

I see why you said this system is not going to save the planet.
Much of the theory comes from divestment: if I no longer own something, I will improve the world. But it doesn’t make sense in practice. I’ve met ethical investors from the Middle East who say, “We’re anti-drinking, we don’t want to own liquor companies.” But they did not believe that not having them would prevent people in France from drinking wine. As long as something is legal and makes money, someone will own it. Our greatest power is not as consumers but as voters. Only the government has the power to put a price on carbon, set limits on vehicle emissions and new efficiency standards for buildings. It is also wasting time. The eight-year-old in Bangladesh with no carbon footprint will bear the brunt as Wall Street kicks the can down the road. It is morally inconceivable.

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