By Reuters
Tens of trillions of global investment dollars are pouring into companies touting robust environmental, social and governance (ESG) credentials. Now, short-sellers spy an opportunity.
Such hedge funds, often cast as villains of the piece because they bet against share prices, scent a profit from company valuations they believe are unduly inflated by ESG promises or which they say ignore risks that threaten to undermine the company’s prospects.
The fact short-sellers, who look to exploit information gaps, are targeting the ESG sphere underlines the complexities facing investors in accurately gauging companies’ sustainability credentials. Teenage climate activist Greta Thunberg last week spoke of CEOs masking inaction with “creative Public Relations (PR)”.
Against a backdrop of growing public and political concerns about climate change and economic inequality, companies are under increasing pressure to show they are taking greater responsibility for how they generate their profits.
Investments defined as “sustainable” account for more than a quarter of all assets under management globally, according to the Global Sustainable Investment Alliance. About Sh3,100 trillion ($31 trillion) has been invested, buoyed by analyst reports that show companies with strong ESG narratives outperform their peers.
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