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The Unsustainable Sustainable Investing Boom

As financial institutions rush to profit from the boom in sustainable investing, they risk overselling its ethical and commercial benefits. It would be a shame if a movement with genuine potential to change the world were stopped in its tracks by old-fashioned misselling.

LONDON – Whether in airports, hotels, or glossy magazines, advertisements for sustainability-themed financial products are everywhere these days, bombarding investors with some variant of the message, “Make money while doing good.” And who could object to that?

But a movement that aims to pioneer a more high-minded, socially beneficial form of financial capitalism is starting to exhibit some familiar flaws: rapid growth driven by slick marketing, lack of standards and regulation, and confusing products that investors often misunderstand.

Sustainable investing is growing at breakneck speed. According to the Global Sustainable Investment Alliance, over $30.7 trillion of assets globally in 2018 were invested using environmental, social, or governance (ESG) criteria, a 34% increase from 2016. In Europe, sustainable investing accounts for around half of all managed assets; in the United States, the proportion is now over 25%. The world’s largest asset managers are falling over themselves to appeal to millennial investors, who increasingly want their money to be invested in accordance with a social or green theme.