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Do ESG Funds Always Adhere to ESG Principles?

Investors poured nearly $120 billion into environmental, social, and governance (ESG) ETFs last year, topping last year’s $80 billion in inflows and setting a new record. Unfortunately, the rising interest in ESG investments has led to a growing problem with ‘greenwashing’, or making assets appear ESG-friendly to attract investors.

As You Sow, a non-profit shareholder advocacy group, recently found that 60 of 94 ESG funds failed to adhere closely to the principles of ESG investing, making it impossible to tell the difference between a true ESG offering and a greenwashed fund. The researchers shared these findings with the SEC in hopes the agency would enact stricter rules.

Let’s take a closer look at the recent study, why greenwashing is a problem, and how investors can best align their portfolio with ESG goals.

Be sure to check out our ESG Channel to learn more.

Study Finds Widespread Greenwashing

Prospectus phrases and their association with good and bad funds

How to Avoid Greenwashing

The Bottom Line