{"id":183658,"date":"2023-01-03T17:27:00","date_gmt":"2023-01-03T22:27:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/traders-insight\/esg-themed-etfs-flail-as-strategy-comes-under-scrutiny\/"},"modified":"2023-02-09T15:53:56","modified_gmt":"2023-02-09T20:53:56","slug":"esg-themed-etfs-flail-as-strategy-comes-under-scrutiny","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/esg-themed-etfs-flail-as-strategy-comes-under-scrutiny\/","title":{"rendered":"ESG-Themed ETFs Flail As Strategy Comes Under Scrutiny"},"content":{"rendered":"\n<p>Investors focused on financial instruments that aim to improve the environment, society, and governance-related (ESG) issues have recently been contending with a slew of headwinds that have placed the investment philosophy under some significant pressure.<\/p>\n\n\n\n<p>A long list of exchange-traded funds (ETFs) that tout ESG-related themes have lost a relatively large share of value, amid certain marketing practices among major financial firms that some regulators have deemed deceptive.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/02\/Picture2-2.jpg\" alt=\"A long list of exchange-traded funds (ETFs) that tout ESG-related themes have lost a relatively large share of value, amid certain marketing practices among major financial firms that some regulators have deemed deceptive.\" class=\"wp-image-172051 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><\/figure>\n\n\n\n<p>Indeed, a host of large financial institutions have been hit with reputational damage in 2022, arising from regulatory scrutiny and material fines, including each of <a href=\"https:\/\/www.sec.gov\/news\/press-release\/2022-209\">Goldman Sachs\u2019<\/a> and <a href=\"https:\/\/www.yahoo.com\/video\/deutsche-bank-raided-authorities-over-162135134.html?guccounter=1&amp;guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&amp;guce_referrer_sig=AQAAAMGz_uTS-Gb_w-n2mLrxyBsgFGmyNp03Mj60CbW9hrKN1hp1nelveSgzi-5RGOXVVjlTZBLH_LTgw8xfnw2k4O39V8TC93K9FzTQwNwoCEEWl8ocdsQ5B4k-e6EDUNHKhtBtf3hQl5u4yUByIrY8FNViMAVvsX0mHgH9FII876Dl\">Deutsche Bank<\/a>\u2019s asset management arms, as well as <a href=\"https:\/\/www.sec.gov\/news\/press-release\/2022-86\">BNY Mellon\u2019s investment advisory business<\/a>.<\/p>\n\n\n\n<p>In the case of Goldman Sachs Asset Management (GSAM), for example, the company paid US$4 million to settle charges with the U.S. Securities and Exchange Commission (SEC) for policies and procedures failures involving two mutual funds and one separately managed account strategy marketed as ESG investments.<\/p>\n\n\n\n<p>Sanjay Wadhwa, Deputy Director of the SEC\u2019s Division of Enforcement and head of its Climate and ESG Task Force, said that in response \u201cto investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as \u2018ESG.\u2019<\/p>\n\n\n\n<p>\u201cWhen they do, they must establish reasonable policies and procedures governing how the ESG factors will be evaluated as part of the investment process, and then follow those policies and procedures, to avoid providing investors with information about these products that differs from their practices.\u201d<\/p>\n\n\n\n<p>BNY Mellon Investment Adviser also paid a US$1.5 million fine to the SEC for misstatements and omissions about ESG considerations in making investment decisions for certain mutual funds that it managed.<\/p>\n\n\n\n<p>In light of the circumstances, Cecile Fleckten, IBKR\u2019s senior director and head of ESG and sustainability, pointed out that there is \u201ca lot of emphasis now on disclosures and reporting and having a bit more consistency in reporting.\u201d<\/p>\n\n\n\n<p>The European Union, for instance, has been spearheading a myriad of directives over the past few years, including the <a href=\"https:\/\/www.eurosif.org\/policies\/sfdr\/\"><strong>Sustainable Finance Disclosure Regulation (SFDR)<\/strong><\/a>, along with the recently passed <a href=\"https:\/\/finance.ec.europa.eu\/capital-markets-union-and-financial-markets\/company-reporting-and-auditing\/company-reporting\/corporate-sustainability-reporting_en\"><strong>Corporate Sustainability Reporting Directive (CSRD)<\/strong><\/a>. Also, there is a&nbsp;<a href=\"https:\/\/finance.ec.europa.eu\/sustainable-finance\/tools-and-standards\/eu-taxonomy-sustainable-activities_en#:~:text=%E2%80%9CEU%20taxonomy%E2%80%9D.-,What%20is%20the%20EU%20taxonomy%3F,implement%20the%20European%20green%20deal.\"><strong>taxonomy<\/strong><\/a>&nbsp;law: <a href=\"https:\/\/www.fsb-tcfd.org\/\"><strong>the Task Force on Climate-related Financial Disclosures (TCFD)<\/strong><\/a>, and the&nbsp;<a href=\"https:\/\/www.sec.gov\/news\/press-release\/2022-46\"><strong>SEC\u2019s rule on climate disclosure rules<\/strong><\/a>, which has been proposed.&nbsp;<\/p>\n\n\n\n<p>Fleckten continued that the recent regulatory actions taken against the likes of Goldman Sachs, BNY Mellon, and Deutsche Bank comes as \u201cno surprise,\u201d due \u2013 in large part \u2013 to the lack of a universal definition for ESG, leaving it to mean different things to different people. Until then, she adds, \u201cthere will be this bit of this tension on \u2013 is it greenwashing? Is it a PR exercise or is there real value in having these ESG labels?\u201d Overall, Fleckten noted, \u201cthere will continue to be some risk of greenwashing, but the good news today is that there\u2019s a lot of attention, a lot of focus, a lot of new regulations, a lot of areas where reporting and disclosure is becoming more pronounced than ever before.\u201d<\/p>\n\n\n\n<p>ESG investments had also been buoyed by the optimism presented by the passage of certain legislation such as the <a href=\"https:\/\/www.congress.gov\/bill\/117th-congress\/house-bill\/3684\">Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act)<\/a>, which, among other supportive ESG-related measures, aims to upgrade the nation\u2019s power infrastructure to deliver clean, reliable energy in an effort to achieve a zero-emissions future.&nbsp;<\/p>\n\n\n\n<p>The new law also purports to invest US$7.5 billion to build a national network of electric vehicle chargers in the U.S. to fight climate change.<\/p>\n\n\n\n<p>Meanwhile, some ESG-themed ETFs have lost a fairly sizable amount of value amid the greenwashing turmoil and despite the regulatory disclosures and fiscal support.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p><strong>Learn More<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/impact.interactivebrokers.com\/en\/home.php\"><strong>IMPACT by Interactive Brokers<\/strong><\/a><\/p>\n\n\n\n<p><strong>Courses<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/tradersacademy.online\/trading-courses\/fundamentals\/esg-investing\"><strong>IBKR Traders\u2019 Academy \u2013 ESG Investing<\/strong><\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.coursera.org\/specializations\/esg-investing-financial-decision-in-flux\"><strong>Coursera \u2013 IBKR\u2019s ESG Investing: Financial Decisions in Flux<\/strong><\/a><\/p>\n\n\n\n<p><strong>Podcasts<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.tradersinsight.news\/ibkr-podcasts\/esg-investing-seeking-higher-standards-as-controversy-stirs\/\"><strong>IBKR Podcasts &#8211; EP 51. ESG Investing \u2013 Seeking Higher Standards as Controversy Stirs<\/strong><\/a><strong><u><\/u><\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.tradersinsight.news\/ibkr-podcasts\/cooking-it-up-in-a-lab-investing-in-the-future-of-bioengineered-food\/\"><strong>IBKR Podcasts \u2013 EP 40. Cooking it Up in a Lab \u2013 Investing in the Future of Bioengineered Food&nbsp;<\/strong><\/a><\/p>\n\n\n\n<p><strong>Webinars<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/ibkrwebinars.com\/webinars\/esg-investing-gsss-bonds\/\"><strong>IBKR Webinars \u2013 ESG Investing: The Global State of GSSS Bonds<\/strong><\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/ibkrwebinars.com\/category\/webinars\/webinar-topics\/esg\/\"><strong>IBKR Webinars \u2013 ESG-related Topics<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investors focused on financial instruments that aim to improve the environment, society, and governance-related (ESG) issues have recently been contending with a slew of headwinds that have placed the investment philosophy under some significant pressure.<\/p>\n","protected":false},"author":2,"featured_media":183660,"comment_status":"closed","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5924,14,6,8,9,26,3],"tags":[734,6235,297],"contributors-categories":[13576],"class_list":{"0":"post-183658","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-esg","8":"category-etfs","9":"category-north-america","10":"category-region","11":"category-securities","12":"category-text-articles","13":"category-traders-insight","14":"tag-esg","15":"tag-esg-etfs","16":"tag-etfs","17":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ 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