ESG Has Become a Meaningless Term

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About This Episode

The multi-trillion-dollar ESG fund industry faces a regulatory problem. By the end of 2025, funds with net assets of $1 billion or more must comply with the amendments to SEC Rule 35d-1, better known as the “names rule.” It requires funds with names that include ESG terms have at least 80% of the fund invested in assets that aligned with those terms. The amendments strengthen prospectus disclosure requirements, and mandate that terms used in the fund’s name suggesting an investment focus be consistent with their plain-English meaning or established industry use.

My guest today will explain how ESG has become a meaningless term to investors. The result has been massive flows to ESG funds that have large holdings in oil companies, agricultural chemical manufacturers and similar companies that many investors are not aware of. Fund managers are struggling to explain what is going on, as they must to comply with the names rule.

About Our Guest

Jason Britton is president and chief investment officer at Reflection Asset Management, and co-founder, owner & CEO of Reflect-Analytics.

Jason Britton has been building social impact U.S. equity strategies for individual and institutional investors for 25 years. He retired from Bank of America/Merrill Lynch in 2016 as managing director and co-head of the firm’s impact investing committee to take a professorship at the College of Charleston School of Business, where he teaches impact investing, and to launch Reflection Asset Management, a boutique RIA specialized in building customized portfolios for high-net-worth families, individuals and endowments. In 2020, he launched Reflection-Analytics, a fintech that built Reflect, named to the WealthTech100 for 2024. Reflect is the only digital platform for investor-focused ESG analysis, serving asset managers, financial advisors, and investors/institutions across six key areas: advisory, due diligence, compliance, portfolio management, auditing and reporting. Reflect is the market’s only “names rule"-compliant software, providing an investor-focused rating that scores companies across 250 data points in 18 ESG sub-themes while also offering asset managers a portfolio management tool to ensure continuous compliance.

Show Notes

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