Many asset managers and mutual funds seem to have forgotten, ignored or neglected basic principles when it comes to corporate investing and Environmental Social and Governance, or ESG.
Allen Mendenhall is associate dean and Grady Rosier Professor in the Sorrell College of Business at Troy University, where he directs the Manuel H. Johnson Center for Political Economy. Visit his website at AllenMendenhall.com.
The role of asset managers is to invest people’s money – their assets – in mutual funds, securities or exchange-traded funds that yield good returns. Why would you entrust an investor with your money if not for the expectation that its investment on your behalf will appreciate in value or generate income?
Under this arrangement, the asset manager isn’t the beneficiary of the holdings it manages. You are. The asset manager has a fiduciary duty to you – and must act with good faith, candor and heightened caution – because it controls your money. It’s unethical to use someone’s money in ways he or she doesn’t like, or in ways he or she doesn’t agree to. Individuals, by contrast, are free to indulge ESG goals when investing their own money.