The Majority of ESG Funds Are Not Sustainable. Here’s Why.

Environmental, social, governance investing sounds great, but unless you go the extra mile with your due diligence, your “green” investment may not be doing all the good you had hoped.

An inflatable world globe lies crumpled, with half the air having leaked out.
(Image credit: Getty Images)

So, you buy an ESG mutual fund or ETF and you’re excited that you’re going to change the world with your investments. But then you get your annual report and start browsing through the holdings and realize that your ESG fund is simply less bad than your traditional index fund, and reality sets in. This isn’t what you thought it was.

This happens all the time because there is no regulation when it comes to labeling funds as “ESG” or “sustainable” or anything else in the responsible investing realm. It’s the wild, wild West, buyer beware, every red flag you can think of.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Peter Krull, CSRIC®
Director of Sustainable Investing and Partner, Earth Equity Advisors

Peter Krull is the Partner and Director of Sustainable Investments at Earth Equity Advisors, a Prime Capital Investment Advisors company, and has been specializing in sustainable, responsible and impact (SRI) investing for nearly 20 years. He earned the Chartered SRI Counselor® from the College for Financial Planning and has been a member of the Investopedia 100 list of the most influential financial advisers in America. Peter is a longtime advocate for sustainable, fossil-fuel-free investing, and works hard to educate his clients and the public on greenwashing in the SRI/ESG industry. He is the host of Dollars & Change, a podcast about sustainable and responsible investing, and he believes strongly in the power of positive, solutions-based sustainable investing focused on the economy of tomorrow.