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Trading in death responsibly: ‘Woke’ funds funnel $5 trillion into arms industry
ESG funds, once champions of environmental causes, have raised ethical concerns after investing heavily in defense stocks
In the cutthroat world of asset management, my gig as an investment banker at Zurich’s top Swiss joint was a tightrope walk between challenge and monotony. Crafting portfolios for the high rollers at the biggest Swiss bank needed a delicate mix of precision and strategy. The daily grind of summarizing, stacking up, and shaping portfolios for the wealthy wasn't just a skill; it was a meticulous drill where financial stability was the goal and the payoff.
In the established 60-40 asset allocation doctrine – a fundamental principle in wealth management – the goal was straightforward: allocate 60% to stocks and 40% to bonds. This implicit guideline, honed through market wisdom, provided clients with a safeguard against the unpredictable nature of individual stocks. However, the intricacies of my role extended beyond the numerical aspects of asset allocation. Placing emphasis on securing a resilient lending value for portfolios became paramount, evolving beyond a mere metric to become a vital component ingrained in each client’s investment strategy.
Amid financial turmoil, stock selection gained extra importance, and in recent years, the spotlight turned towards ESG funds.
What is ESG investing?
ESG – or Environmental, Social, and Governance investing – provides a framework for investing in funds that take into account environmental, social, and governance factors. It is often used interchangeably with terms like “socially responsible investing (SRI)” and “sustainable investing.” ESG investments, falling under the umbrella of socially responsible investing, analyze a company’s societal impact based on three primary factors:
Environmental (E): This aspect concentrates on a company’s initiatives for environmental preservation, pollution management, responsible waste handling, sustainable land practices, and efforts to reduce carbon footprints.
Social (S): This dimension delves into a company’s commitment to fair labor conditions, equal employment opportunities, and support for community organizations.
Governance (G): This facet relates to the standards governing corporate governance, encompassing ethical business conduct, gender diversity within the board, equitable employee compensation, and overall transparency in corporate operations.
The aroma of cash
But then, where the fallible human touch resides, the scent of corruption detects the aroma of cash – a twist that even seasoned investors couldn't have predicted.
Surprisingly, these funds, celebrated for their ethical foundations, have funneled a jaw-dropping $5 trillion into the arms industry. This bombshell was dropped by Bloomberg this week.
As of Q3 2023, over 1,200 ESG funds, pledged to uphold environmental, social, and governance standards, collectively grip shares worth around $5 trillion in the defense sector. This unexpected plunge into defense investments within the ESG framework has triggered heated debates.
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https://www.rt.com/business/588094-esg-funds-invest-arms-industry/