Investment Advisers will soon be mandated to take Environmental, Social and Governance factors into account when recommending investments. I will tell you now, the rules will prove to be as expensive to comply with, as they will be unfit for purpose. The new rules will fall well short of what the legislation is trying to achieve. Currently although there are many ESG measures out there, we have found no ESG benchmarks that we can trust and that are not open to abuse.
When a measure becomes a target, it ceases to be a good measure.
Charles Goodhart
Have you bought an ESG friendly portfolio or fund already? Whoever sold it to you probably has never heard of Goodhart’s Law. They haven’t considered that the measures they apply have been gamed.
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