Will the rise of ESG investing cause stagflation?

ESG investing is booming. But it may be contributing to today’s stagflation – slower growth and higher inflation – says Tom Traill.

Man on a boat looking at a windfarm
Wind farms: stagflation engines?
(Image credit: © Getty Images/Image Source)

Ethical investing has been around for decades. But its latest incarnation, signified by the acronym “ESG” (investing with an eye to a company’s approach to environmental and social issues, and corporate governance) only really began to gain traction in around 2018, according to search-engine queries, as measured by Google Trends. ESG investing is rather more explicit about the idea that there need not be a trade-off between “good” behaviour and attractive investment returns. Indeed, ESG investing argues that high-quality corporate governance, environmentally friendly practices and good corporate citizenship are material to the performance of financial assets.

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