Unintended Biases in ESG Index Funds

July 6th,2016
ESG investment strategies can help many investors better align their money with their values. These strategies generally target firms that have a limited negative impact on the environment; promote diversity and have good relationships with key stakeholders, employees.However, there is a risk that this focus might introduce unintended sector or style bets, particularly among index funds. Differences in construction methodology can cause some strategies to have larger unintended biases than others.