Yes but obviously index funds have to do much less due diligence—they don’t have to look at the performance of individual companies, nor do they have to look at anything related to ESG. They only have to monitor index composition and things like that, which is less burdensome, much less so relative to the total number of investments you can make .
You initially said ”...this is why I spend so much time looking at methodologies behind ESG ratings and the way mangers apply them.” which suggests to me a significant time sink in the name of impact. Socially neutral investors do due diligence to try and find profit-making companies and so don’t face this burden—presumably you also do due diligence on financial returns? ESG analysis wouldn’t save you from doing due diligence on financial returns, would it?
It is difficult to believe that legions of investors are stupid enough to miss out on the benefits of ESG screening that you allege.
Yes but obviously index funds have to do much less due diligence—they don’t have to look at the performance of individual companies, nor do they have to look at anything related to ESG. They only have to monitor index composition and things like that, which is less burdensome, much less so relative to the total number of investments you can make .
You initially said ”...this is why I spend so much time looking at methodologies behind ESG ratings and the way mangers apply them.” which suggests to me a significant time sink in the name of impact. Socially neutral investors do due diligence to try and find profit-making companies and so don’t face this burden—presumably you also do due diligence on financial returns? ESG analysis wouldn’t save you from doing due diligence on financial returns, would it?
It is difficult to believe that legions of investors are stupid enough to miss out on the benefits of ESG screening that you allege.