Better governance, oversight give reasons to remain optimistic about the future of ESG investing

Financial Post
September 21, 2022.

Over the past two decades, environmental, social and corporate governance (ESG) investing has enjoyed a rapid rise in popularity with more and more investors deploying their capital in pursuit of not only better returns, but a better world.

ESG investing has grown into a US$35-trillion practice globally, but market volatility, buffeted by rising interest rates, geopolitical uncertainty in Europe, global supply chain challenges and fears of an impending economic recession, have not spared ESG funds.

After years of net new deposits, investors withdrew US$3.5 billion from ESG mutual funds in the United States in May 2022, marking the first quarter of outflows in more than five years. In Canada, the iShares ESG Advanced MSCI Canada Index ETF — an ESG index by BlackRock Inc. — is underperforming the S&P/TSX composite by seven per cent year to date.

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