Is ESG Investing A Placebo?

Tariq Fancy, former CIO of sustainable investing at BlackRock, pokes holes in the case for ESG investing

- Anand Tandon

If you are interested in ‘socially conscious investing and haven’t heard of Tariq Fancy, that changes now. Mr. Fancy, a Canadian social entrepreneur was, for 21 months, the Chief Investment Officer of sustainable investing at BlackRock.

Founded and helmed by Larry Fink, BlackRock is the world’s largest asset manager, with over $9 trillion of assets under management. That makes for significant clout in the boardrooms of large companies around the world. So, when Mr. Fink's letter to CEOs in 2017-18 spoke about a “sense of purpose,” and was followed up a year later with “a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process,” the Davos crowd sat up and took notice.

In January 2018, Tariq Fancy joined BlackRock with a mandate to help integrate ESG (environmental, social, and governance) factors into the investing process for all of BlackRocks’ funds, including managing those that were raised under the ESG umbrella. He quit in September 2019. Earlier, in 2021, he wrote a set of columns in three parts which can be accessed at HTTP:// bit.ly/3huYJzJ, where he states in the preamble that the essay “shares how my thinking evolved from evangelizing “sustainable investing” for the world’s largest investment firm to decrying it as a dangerous placebo that harms the public interest”. What caused this change of heart and is the accusation justifiable?

Does ESG investment increase returns?