WASHINGTON, D.C.— Legal Director and Securities Specialist Stephen Hall issued the following statement in connection with the release of a Fact Sheet concerning investing with regard to environmental, social, and governance (ESG) factors, ahead of a House Financial Services Committee hearing:
“The expression that people ‘vote with their feet’ has never been more true than in the case of investing with regard to environmental, social, and governance (ESG) factors. Investor interest in ESG investing is strong and steadily climbing. By year-end 2022, investor assets in sustainable investments amounted to $8.4 trillion, or about 12.6% of all U.S. assets under management. Fueled by this investor demand for sustainable investment options, 444 mutual funds and 177 ETFs offer investors a way to incorporate the ESG factors into their investment decisions. Investor demand for ESG investing combined with an industry response that has satisfied that demand means ESG investing is here to stay.
“ESG investing is not just about using investments to address major social challenges. ESG investing also offers investors significant financial returns. Despite baseless attacks on ESG investing that suggest investors must sacrifice returns for values when incorporating ESG factors into their investment decisions, this is not the case. Indeed, the data consistently show that sustainable investing generates returns similar to or better than those of the overall market. And it stands to reason. Research shows that companies that are better prepared to deal with the impact of climate change and to compete in a decarbonized economy will likely be safer and better investments than companies that are not. So while many investors care about ESG issues because they want to advance policy goals, they also understand that companies that take the ESG factors seriously offer better financial returns.
“Investor demand for ESG investments coupled with the strong returns such investments offer means investors need to know where companies stand on the ESG criteria and what investments incorporate ESG investing. Fortunately, the SEC has proposed three rules that aim to provide investors with precisely the information they want and need. These rules would mandate disclosures about how companies are responding to climate change, require disclosures about how funds incorporate ESG into their investment strategies, and prevent the use of misleading fund names, including names that might falsely suggest a focus on the ESG factors. The adoption of these rules would ensure that, along with their demand for ESG-related products, investors receive the information about the ESG factors that they need. Policymakers should reject calls to stifle ESG investing and instead embrace the benefits that ESG investing offers and that investors clearly want.”
Read our full fact sheet here.
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