Keeping faith with ESG principles is hard to do 

The investment community has been keen to talk about environmental, social and governance investing but many have been reluctant to refer to ethical investing (“ESG: investors must stop trying to do the right thing for the wrong reasons”, Lex, FT.com, March 31).

It is refreshing to read Lex using the terms interchangeably but, outside the faith investors, today it is radical to do so. The mention of ethics implies choices. The current enthusiasm for ESG is welcome but some have been unwilling to say that being ethical can at times — and sometimes for long periods — mean lower revenues and profits than otherwise.

Russia’s war with Ukraine has shown that ESG cannot be divorced from ethics. It has also shown that a focus on ESG criteria, while necessary, is not sufficient. However, while activist investors might promise success, as Lex’s examples illustrate, they tend to focus on specific concerns with a company rather than its overall ethical approach. Activist investors professing ESG credentials face the same ethical challenge from the invasion of Ukraine as do other ESG investors.

First published in the Financial Times on 7 April 2022.