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ESG ratings: Inconsistent criteria and questionable impact
Find out why ESG funds are not always sustainable and profitable. New findings reveal the questionable promise of eco-funds. Reading time: 3 minutes.
ESG ratings: Inconsistent criteria and questionable impact
Money makes the world go round, and investments should pave the way to climate protection. Investing according to ESG criteria (environmental, social and governance) excludes companies that do not meet environmental standards, working conditions and corporate governance. The EU supports this form of investment with guidelines, but investors show little interest. Despite strict criteria, ESG funds are seeing outflows, as analyzed by Morningstar.
German savers show little interest and ESG criteria only minimally influence their investment decisions. Returns and costs remain more important. For example: The S&P Global Clean Energy Index fell by a third since 2022, while the S&P World Energy Index with fossil fuels rose by 50%. The instability caused by geopolitical events such as the Ukraine conflict shows the difficulty of sustainable investments.
Rating agencies classify companies according to sustainable criteria for funds. A study by economists shows the lack of uniformity in ESG assessments. The influence of sustainable investments on corporate behavior and climate protection is still unclear. Skeptics doubt the overall meaning of sustainable investing because no study shows its influence on companies. Investor behavior and geopolitical developments determine the markets – a complex picture of sustainable financial flows.