The Death Knell of ESG Investing In 2016, Wall Street found a new way to get rich. As we always expected, it's all come crumbling down... For decades, many Americans have seen Wall Street as nothing but a pack of cold profiteers. Financial advisers, investment bankers, and hedge-fund managers would take any "get rich quick" pitch, package it up, and charge you high fees for their services. They chased gains for themselves and their clients. And as a result, they demanded one single thing of corporate CEOs: shareholder returns. In other words, it was all about making stock prices go up. But about a decade ago, Wall Street seemed to develop a softer side... Its ESG side. ESG stands for "environmental, social, and governance." Wall Street began highlighting companies involved with green-energy initiatives, workplace diversity and inclusion, and ethical corporate decisions. The idea is that ethically minded investors could make money in stocks... without feeling squeamish about profiting from evil corporations. Proponents further argued that an ESG focus improves a company's financial performance. In 2019, a collection of 181 major CEOs known as the Business Roundtable released a statement redefining the purpose of a corporation. They declared that companies should serve all stakeholders, including customers, employees, suppliers, and communities... not just shareholders. How touching... But Wall Street wasn't pursuing ESG because of a newly awakened conscience or even a new investment strategy. It was just another way to make some money for itself. Ratings agencies on Wall Street started offering expensive ESG ratings... Consultants popped up to help companies navigate ESG guidelines... Money poured into ESG-branded funds... And since folks on Wall Street had to do more work to judge the underlying companies... they were able to charge even higher fees. We sniffed a rat from the start. ESG could never get its story straight. It had two arguments as to why you should invest in "good" companies rather than all companies. The first pitch was that you should do it because it's the right thing. Selecting only "good" companies would limit your choices and therefore lead to lower returns. But that was the cost of following your values. Turned out, not enough investors bought that line. ESG only grew rapidly when it found a way to promise better returns. The argument here was that bad companies get their comeuppance. If it destroys the environment, a company will eventually get hit with fines or go out of business due to pressure from environmentalists. It may earn a profit in the short run, but if it mistreats its customers, the business will eventually fall apart over time. "Good" companies can last longer and produce higher returns over time... or so the theory goes. But there's no proof that this type of investing leads to higher profits. That's largely because it's hard to measure "goodness." Plus, since many ESG-focused funds avoided heavy industries with excessive energy use, they ended up tilted toward more ESG-friendly tech companies at a time when they performed very well. Now, asset managers in Europe and the U.S. are winding down hundreds of ESG funds due to "anti-greenwashing" rules. (Greenwashing is when a company falsely portrays its products or services as environmentally friendly.) And President Donald Trump's executive orders targeting diversity, equity, and inclusion ("DEI") programs have had a chilling effect on corporations. They no longer want to highlight their social or environmental goals. The number of companies citing "ESG" on earnings calls has fallen by nearly two-thirds since 2023. The fall of ESG is no great loss... It might make you feel good investing in a company that you think is doing good, but if you want to fill your portfolio with companies that will actually be good for your wallet, you should know about my friend Marc Chaikin's Power Gauge... Marc – founder of our corporate affiliate Chaikin Analytics – started on Wall Street as an analyst more than 50 years ago. During his tenure, he created proprietary stock indicators that are still used by the biggest Wall Street firms and traders all over the world... For example, the industry-standard "Chaikin Money Flow" tracks whether the "smart money" is piling into or fleeing specific stocks and funds. If you've ever used an online broker to manage your money, you've likely already benefited from Marc's work without even knowing it. Marc was a legend on Wall Street among the bigwigs. But after seeing the devastation the great financial crisis caused, he decided to help teach everyday investors how to do as well as the "pros" using the Power Gauge. His strategy doesn't involve complex trades or simply buying and holding blue-chip stocks. Rather, it uses his Power Gauge in a unique way to discover the best opportunities out there. During the market bottom in 2020, this system flagged nine 20%-plus winners – all with holding periods of less than 90 days. Today, Marc has a new way to see which companies using popular tech innovations – like artificial intelligence – could double your money before you get in. This is the most lucrative investment vehicle he has released in 50 years. Click here to learn more. Now let's get right into this week's Q&A... And as always, keep sending your comments, questions, and topic suggestions to feedback@healthandwealthbulletin.com. My team and I read every e-mail. Improving Your Sleep With a Sleep Mask Q: I use a sleep mask to make sure that no light disrupts my sleep at night. I find this to be a much cheaper solution than getting blackout blinds. Your thoughts? – A.C. A: A sleep mask is indeed a good alternative to blackout curtains. It's also helpful if you have a partner who tends to read before bed. When I'm traveling, I like to use a contoured sleep mask, since it gives your eyes room to move and makes the darkness much more comfortable. (It's a huge improvement on the type of mask airlines give you.) I use the brand Dream Essentials. Another good choice is Manta. What We're Reading... Did you miss it? How I knew to buy the early-April dip. Something different: Is ChatGPT rotting our brains? Here's to our health, wealth, and a great retirement, Dr. David Eifrig and the Health & Wealth Bulletin Research Team
June 27, 2025 | 