Tens of trillions of global investment dollars are pouring into companies touting robust environmental, social and governance credentials. Now short-sellers spy an opportunity….The fact short-sellers, who look to exploit information gaps, are targeting the ESG sphere underlines the complexities facing investors in accurately gauging companies’ sustainability credentials. Teenage climate activist Greta Thunberg last week spoke of CEOs masking inaction with “creative PR”.
Against a backdrop of growing public and political concerns about climate change and economic inequality, companies are under increasing pressure to show they are taking greater responsibility for how they generate their profits.
Investments defined as “sustainable” account for more than a quarter of all assets under management globally, according to the Global Sustainable Investment Alliance. About $31 trillion has been invested, buoyed by analyst reports that show companies with strong ESG narratives outperform their peers.
Some short-sellers, including Carson Block of Muddy Waters, Josh Strauss of Appleseed Capital and Chad Slater of Morphic Asset Management, argue share prices can be bolstered by corporate misrepresentation about sustainability, or so-called “greenwashing”.