The reason why ESG is dying and its future

ESG refers to environmental, social, and governance as a set of criteria for a company’s conduct that socially conscious investors use to evaluate possible investments (The Investopedia Team). 

These days ESG investing has declined in the US since the first quarter of 2022. According to Robert Jenkins – Head of global research at Lipper – by the end of September, US ESG fund assets under management had dropped from $399 billion in the second quarter to $315 billion. As we enter the final quarter of 2023 it seems to keep declining (Goodkind, “ESG Investing Is Dying on Wall Street. Here’s Why | CNN Business”). 

ESG is dying as it cannot perform in financial terms very well. Although the ESG did outperform the 12-month moving average return for the wider market by 2.8 percentage points, the convergence of market, geopolitical, and political developments has seriously undermined the investor’s enthusiasm for ESG investing (Goodkind, “ESG Investing Is Dying. That’s Not a Bad Thing | CNN Business”). Jenkins says “I think ESG was overly trendy and it got caught up in itself” (Goodkind, “ESG Investing Is Dying. That’s Not a Bad Thing | CNN Business”). His words can be interpreted as the ESG has been too dependent on the trend and thus, now, they are not saying anything new or special, but just keep repeating its words (Goodkind, “ESG Investing Is Dying. That’s Not a Bad Thing | CNN Business”). The firms used greenwashing which is a word derived from “white wash”. It is used when the firm uses “green” for advertising or marketing their product to persuade the consumers that their product is considered the environment (Hayes). As the company used ESG, instead of boosting its popularity it decreased its reputation and hence, the ESG has failed. 

However, ESG is expected to reemerge in a new way collaborating with artificial intelligence. As ESG has to collect an enormous amount of data, artificial intelligence can be used to collect data and analyze it (Goodkind, “ESG Investing Is Dying on Wall Street. Here’s Why | CNN Business”).