ESG investing and asset managers

Abstract Sustainable investing, or environmental, social, and governance (ESG) investing, is a broad term that encompasses decisions by at least three key groups. Corporations make decisions about whether to operate consistently with ESG values; investors may have preferences regarding whether to invest consistently with ESG values; and asset managers must decide whether to adjust their investing to take ESG factors into account. The focus of this article is the last category: asset managers managing money for others, including retail investors and institutional investors, such as funds in which others invest. This article follows the format of the other contributions to this special edition. The article provides brief background and history of ESG investing by asset managers in the USA, with particular emphasis on how ESG investing has become politicized. Next, the article addresses the private law regime governing asset managers and ESG investing, beginning with asset managers’ fiduciary duties and discussing whether ESG investing is consistent with the fiduciary duty of loyalty. The article includes a discussion of private litigation against asset managers for ESG-related claims. The article then turns to the public law regime governing asset managers and ESG investing. It discusses statutes, presidential executive orders, rulemaking, soft law, and regulatory enforcement actions. The consistent theme throughout the article is the politicization of ESG investing and the backlash against efforts to promote ESG factors in the USA.