Invest

“An investment is by all right-minded people to be commended, because it brings comforts and necessities to the citizenry. But, if continued indefinitely, it will lead to the endless pursuit of unnecessary things.” – Adam Smith

Economist published a warning in 2015. It read “Warning: too much finance is bad for the economy”

We are tumbling through life at the same rate as everyone else. Everyone grows 1-day older, with every rotation around the sun. Time is the only arrow that is universally equal for every person, and it dictates the choices one makes.

The main reason to take flights is not that they are friendlier, or safer than other modes of transport. They save time.

It is non-trivial to understand capitalism, and all the forms in which it manifests itself. It’s primary goal is to create functional and free markets. As the idea won, the failures of society got pinned on capitalism, even when well-known solutions remain hidden in plain sight. This brings us to the topic for this post. It is ESG. Modern finance has created a potpourri of investment products, each of them claiming to make our lives more prosperous. They are the things that make the system function, the thing that gives us the things we see around us. Finance is the secret sauce of our modern society.

Can finance be the savior of our modern world? The force that gives the edge to the good, and defeat the evil. The metaphorical hero of our saga. ESG is the thing that claims it is our ultimate savior. All one needs to do is move our investments from dirty funds to ESG funds. The funds where money goes to responsible corporations who save the world, literally save the world. On the face of it, it seems to be an overwhelmingly simple solution to the collective woes of the society. A radically simple solution. A win-win-win if there ever was. Prosperity aligned with environment, society and governance, taken care by a single elegant savior.

Alas, as with every idea that the world of investment products brings into existence, the devil is in the details. ESG funds are nowhere related to the actual principles of E, S and G. They are a thin wrapper of marketing over regular run-of-the mill funds. I have no issues with their marketing, however one needs to pick our poison carefully.

Full disclosure - I have invested small amounts in few ESG funds. It is mainly for reasons of diversification. They need to prove their case strongly for investors to take them seriously. Growing faster than competing funds would be a good place to start.

Best, Umang