Sustainable investing faces the beginnings of a backlash

SINCE TIME immemorial the investment industry has sought to turn money into more money. This is not a simple trick to pull off—hence the rewards proffered to those who do it well. The complexity of picking which assets to own—rich-world equities or poor-country bonds, office blocks or orange-juice futures—contrasts with the simplicity of judging the success of those investments. The winner, put crudely, is whoever snags the most marbles while taking the fewest risks. That the money in question has helped build companies or kept governments ticking over seems almost incidental to the exercise.

This approach is starting to feel old-hat. More savers want a better idea of what their money gets up to. What if their cash could be used both to generate a pension, and improve the state of the world? “Sustainable” investment funds in the broadest sense managed $35trn of assets in 2020, reckons the Global Sustainable Investment Alliance, an industry group, up from $23trn in 2016. No issuer of shares or bonds can ignore virtuous investing. Banks increasingly refuse to lend to firms with insufficiently impressive environmental, social or governance (ESG) credentials. Consultancies assessing whether bosses are doing their bit to combat climate change or social inequality have proliferated.

Savers may bask in the feeling that their...