Socially responsible investing has attracted some $12 trillion in the United States; many argue it’s no longer a fad. But a recent policy brief by conservative and libertarian think tank The Heartland Institute argues that professional money managers are violating their fiduciary duties by putting clients in sustainable investments, especially those with an environmental tilt.
“A growing number of activists and investors believe fossil fuels cause serious harm to life on Earth and that the problems allegedly associated with fossil fuels will only get worse if levels of carbon dioxide (CO2) emissions are not reduced,” writes former merchant banker Martin Hutchinson. “This view is severely flawed and has caused numerous investors to improperly manage investments.”
These activists pressure managers to influence fossil fuel companies, allocate to companies working on alternatives to fossil fuels, and divest fossil fuel related investments, Hutchinson claims. “Complying with these radical requests could violate the fiduciary duties of fund managers.
The government also influences investments in sustainable companies, via subsidies, the paper argues.
“Such investments usually involve government subsidies and are made as a result of pressure from governments, meaning they are not promising on their own merits. Rather than embrace sustainable investment practices, fiduciaries should focus on sound science and investment practices that maximize risk-adjusted returns.”