As many analysis and commentators over the past few months have shown, a majority of funds labelled as ESG are not investing (or not only) in companies fighting climate change, developing solar panels or cleaning the oceans but rather in trending tech stocks such as Microsoft, Facebook and Alphabet.
As we can see from the graph below, among Morningstar indices, those labelled as 'sustainable' have higher tech exposures than their parent indices, with EM being the one with the highest difference. Dawn of a new hope for ESG: Growing awareness of global issues will see sustainable investment skyrocket However, this should not come as a surprise because it is the outcome of how indices are built and how they rely on ESG scores and ratings, where the tech sector usually scores highest from an ESG risk standpoint. Therefore, the strong exposure of ESG indices to tech stocks should n...
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