Sustainable Funds: Drivers of Progress or Expressions of Preference?

Lindsey Stewart

Chapter 5 in Sustainable Investing:Problems and Solutions, 2024, pp 141-152 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Funds with “sustainable” labeling have taken an outsized share of global fund inflows in the 2020s to date. However, there is a lack of clarity on what they actually do, what role they play in investors’ portfolios, and whether it is a case of “sacrificing returns for the greater good.” Regulators globally are trying to fill the gaps by proposing prescriptive labeling and disclosure frameworks to ensure the investors know what they are buying. But, are the regulations built on the right premise? Are “sustainable” funds designed to drive global progress on issues like climate change and human rights or do they merely cater to investors’ ethical preferences on environmental and social topics? This chapter examines the status quo, the existing and proposed regulations aimed at addressing how asset managers treat sustainability themes, and how these regulations fit with the ongoing debate over the role of sustainable funds.

Keywords: Sustainable Investing; Impact Investing; Corporate Social Responsibility; Materiality; Externalities; Sustainability; ESG; ESG Funds; ESG Factors; ESG Scores; SASB; SDG; DEI; Private Equity; General Partners; Active Ownership; Investment Stewardship; Machine Learning; Natural Language Processing; Large Language Models; Transition Economy; Climate Risk; Net-zero Investing; Divestment; Greenhouse Gas Emissions; Scope 3 Emissions; Modern Portfolio Theory; Venture Investments; Carbon Dioxide Removal; Carbon Credits; Fuel Production; Portfolio Management; Market Sentiment; Factor Investing; Portfolio Optimization; Post-investment Management; Digital Transformation; Fixed Income; Portfolio Performance Measures (search for similar items in EconPapers)
Date: 2024
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