How to find a mutual fund that's truly climate friendly

Investing

Published: September 14, 2023 4:05 am

Last Updated: September 14, 2023 9:06 am

(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) — Should a mutual fund manager be labeled “climate friendly” for investing in Tesla $TSLA ?

The answer turns out to be surprisingly complicated. On the one hand, since Tesla is doing so much to reduce fossil fuel use, you could easily argue that a manager deserves climate-friendly credit for investing in the company’s stock. On the other hand, S&P 500 index funds also invest in Tesla, and it doesn’t seem right to call a passive index fund “climate friendly” just because Tesla is in that index.

A new study proposes an answer that is conceptually simple but quite difficult to actually calculate: Measure the extent to which a portfolio deviates from what it would have held independent of ESG. …

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