The envisioned benefits of ESG investing—owning companies that follow responsible environmental, social, and governance policies—have failed to materialize. Instead, the blind acceptance of ESG precepts has resulted in trillions of dollars being misallocated and zero progress toward its principle target: climate change. Terrence Keeley, author of Sustainable: Moving Beyond ESG to Impact Investing, shows how ESG got the ideology right and the methodology wrong. So far, socially responsible investing hasn’t changed anything while handing investors subpar returns.

Over 5,000 institutions controlling $120 trillion in capital have pledged to follow the UN’s Principles for Responsible Investing. Terry believes just 1.6% of that capital is all that’s needed to achieve its goals. That belief laid the foundation for 1PointSix LLC, the company he founded that is working to make the “Do well and do good” philosophy an impactful reality. In this week’s interview, Terry and I discuss: ESG will not be enough. We need economic growth that benefits more people and is sustainable. Why we must invest in “dirty” firms if we want to make them greener. How to achieve the “double bottom line.” Why the ESG mindset is not the way to generate alpha. The “Doing good and doing well” approach must include solving energy poverty—which requires nuclear energy. The need to better measure the impact (or lack thereof) of ESG funds. Why climate change requires collective action on a global scale. The 5 things needed for ESG to work.

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