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Too much ESG enthusiasm risks a bubble that harms a noble cause

Environmental, social and governance-themed investing may produce better returns. But if lots of investors pile in at once, they could end up getting ahead of themselves

A balloon flying dangerously close to a cactus
A balloon flying dangerously close to a cactus Photo: Getty Images

Cheerleaders for ESG investing could not resist trumpeting the strong performance of stocks with high sustainability ratings in the early weeks of the coronavirus crisis. The outperformance was a vindication of their focus on environmental, social and governance factors they said.

They may or may not be right to claim credit for the outperformance. But either way they should not overdo the self-congratulation.

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