A letter from CCM’s Chief Impact Strategist, David Sand, on Professor Burton Malkiel’s article “Sustainable Investing Is a Self-Defeating Strategy”

October 2020 | ESG investing

In September, Professor Burton Malkiel wrote a story in the Wall Street Journal, “Sustainable Investing is a Self-Defeating Strategy,” and included his thoughts on the shortcomings of the practice. The article’s headline was more incendiary than the text, but his arguments—and things he left out—are worth noting. Below are some of Malkiel’s main points:

  • Research firms often have differing ESG ratings for the same companies. This is true; however, research firms frequently have differing buy/hold/sell ratings for the same company based on their opinion of credit worthiness or growth prospects. A cornerstone of active management is that there are multiple variables that enter into investment decision making. So too with ESG.
  • It is difficult to determine optimal carbon exposure when addressing climate change. This is true; however, some may embrace being completely fossil fuel free while others see natural gas as an acceptable transitional energy source. Informed decisions on these crucial issues are highly personal and reasonable people may differ on their choices.
  • There should be legislation, regulation, and taxation on carbon. We agree; however, should investors get a free pass that lets them ignore the damage that is occurring if they just say that climate change remediation is solely the business of government? We all have a stake in the future of the planet and the role our portfolios can actively play now in our survival.
  • Professor Malkiel is, to say the very least, a fan of index funds. His book, A Random Walk Down Wall Street, is an essential text and considered the bible of passive investing. For three decades he was affiliated with the Vanguard Group and helped it build its index fund empire. Malkiel’s opinion piece ends with a suggestion that an investor interested in ESG issues should choose an index fund that aligns with their values. He is too discrete to mention that Vanguard offers a suite of ESG funds and ETFs with assets of almost $12.5 billion. Further, Vanguard’s website lists total ESG investment vehicles at $161 billion, significantly higher than the $35 billion estimate cited in the Professor’s article.

What then is “self-defeating” about sustainable investing? Many investors and investment managers are committed to ESG and are unlikely to be deterred by anti-ESG rhetoric. Perhaps the objections are more than issues of performance or size of the investment universe. Maybe advocates of so-called efficient markets do not want investors to have voice or agency about moral and ethical issues that place a lens on corporate and management behaviors. Others believe that investors, investment managers, corporations, and shareholders all have a part to play in making a more livable planet and a more just society.

We welcome your thoughts and are happy to further discuss the repercussions of impact and ESG investing. Please reach out to CCM’s Chief Impact Strategist, David Sand, at for more information.


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