Sustainability investing blends warm glow and positive impact, but recent claims of high returns from values-based investing are misleading. This piece calls on the investment ecosystem to disentangle emotional satisfaction from genuine impact.
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Abstract
The ecosystem we now call sustainability investing has always had positive impact and warm glow as its components. Yet in recent decades a false claim has emerged whereby investors can create much positive impact while enjoying warm glow by excluding from their portfolio companies violating their values or including companies supporting their values. Some even claim that investors can earn higher than market returns. I argue that it is time to stand against these false claims and separate once again positive impact from warm glow. I describe what separation and regrouping would require of the ecosystem of fund managers, educators, financial advisers, rating agencies, and investors.