ESG is a Category Error that Needs Unbundling
The acronym jams together disparate and sometimes contradictory objectives.
The biggest taxonomic mistake in ESG is the category itself. This creates a handy marketing tool for asset managers to sell funds to customers who do not want their investments to finance bad stuff. The problem with the acronym is that it jams together disparate and sometimes contradictory objectives.
Principled investors should respond to the category errors of ESG by pigeonholing themselves more adeptly. If their temperaments and time pressures recommend passive funds, they should remember ESG is only a flag of convenience. Otherwise, they should unbundle this cumbersome category and try to do the right thing unaided. They will often fail. But that is the human condition.