These last few months have been rich in controversies and debates of all kinds around the usefulness and quality of ESG (environmental, social and governance) criteria. These three letters refer to the strategies put in place by asset managers to integrate non-financial issues into their investment decisions and thus offer investment vehicles qualified as “sustainable” or “responsible”.
On the tail side, success is there. According to the French Financial Management Association (AFG), responsible investment, in the broad sense of European regulations, weighed 2,100 billion euros end of 2021, i.e. more than half of the capital managed in France. Just as impressive, the increase over one year is 33%!
On the face side, questions about “greenwashing” have never been so numerous. The scandal which affected the group of retirement homes Orpea in particular did a lot of harm. The company, extremely well rated on the ESG plan by extra-financial rating agencies, was in the portfolios of many managers claiming to be sustainable finance when it was accused of mistreating residents and embezzling public money. The war in Ukraine has also contributed to reviving old debates on the financing of armaments and energy by “responsible” funds.
Fallout of euphoria
Enough to fuel unease in the world of sustainable finance. “It’s a crisis of rapid growthbelieves Hervé Guez, director of equity, interest rate and solidarity management at Mirova, a subsidiary of Natixis IM specializing in sustainable finance. ESG is an old subject, but various regulations have led to a very strong acceleration in recent years, pushing many players to create an ESG offer. It may have gone a little fast. »
Maturity phase or questioning? In any case, the euphoria of the last few years, when ESG funds pranced at the top of the performance in the rankings, seems to have died down. They suffer from two characteristics. First of all, they invest a lot in “growth stocks” – those companies with high growth rates and whose stock market value is very sensitive to the level of interest rates. Their sharp increase in the first half caused the valuation of the latter to fall. In addition, these funds are overall underweight in the energy sector. However, the war in Ukraine has caused the price of oil and companies in the sector to soar.
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