Shades of green: Funds slash ESG rankings on legal worries

By Trey Thoelcke Updated Jan 19, 11:22AM EST · Published Jan 19, 4:17AM EST

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Shades of green: Funds slash ESG rankings on legal worries — © a-herzog / Flickr

(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — It’s hard — in theory — to be against requiring mutual funds and ETFs to disclose more accurately and completely the ways in which they are “sustainable.”

In practice, however, those requirements appear to shed more heat than light. In many fundamental ways, “sustainability” is in the eye of the beholder. To ensure that the climate-friendly ETF you’re considering is indeed climate-friendly, you have no choice but to closely analyze the companies in which it invests.

That’s the conclusion I draw from reviewing the European Union’s “Sustainable Finance Disclosure Regulation” (SFDR). Though the SFDR was adopted last March, a number of specific standards for its implementation didn’t go into effect until this month. In many ways the SFDR is attempting to define the undefinable, and it faces many serious and perhaps insuperable obstacles.

This isn’t just a problem for European investors, by the way. The SEC is in the process of finalizing its own set of ESG disclosure rules, and the challenges the EU is facing are a harbinger of what almost certainly will be the case in the U.S. as well…

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.