Does ethical investment withhold capital from those that most need it?

WHAT DOES ESG stand for? To most people it refers to the environmental, social and governance standards that guide a growing number of ethical investors. But Charlie Robertson of Renaissance Capital, an investment bank, reckons ESG risks becoming code for something else: an excuse for investors to put all of their money in Scandinavia.

Prosperous havens rate highly on the criteria ESG investors employ. By contrast, the emerging economies that interest Mr Robertson do badly. They are often dirty and corrupt—at least compared with Sweden.Their most liquid companies tend to be national champions or sprawling conglomerates that neglect minority shareholders and jump into bed with the government. Often emerging-market sovereigns default on their duty to protect human rights. Saudi Arabia, for example, will enter MSCI’s emerging-market equity index in June. That will oblige many investors to plough funds into the kingdom, whatever they...

via The Economist: Finance and economics Business Feeds

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