Don’t Buy Into All of the ESG Pushback

By CEO Sallie Krawcheck & CIO Dr. Sylvia Kwan

Did you see the proposed law in New Hampshire that would make it illegal to invest state funds with an ESG lens (i.e., investing with an eye toward environmental, social, and governance factors, in addition to a financial return)?*



And not just a little illegal. But felony illegal. Go-to-jail illegal. For “not less than one year and no more than 20 years,” if you “knowingly” violate the law, “with any regard whatsoever.” That kind of illegal. 

What's wrong with this? Besides possibly filling up the New Hampshire jails with a bunch of pocket-protector-wearing, spreadsheet-building, tree-hugging investment analysts: So many things. 

First of all, this proposed law makes the 1990s-era assumption that you must give up financial returns to invest in companies that are making a positive impact relative to peers. Not so. In fact, this chart shows that the Morningstar Sustainability Index has outperformed the broader global market since 2019.


And this potential for outperformance makes intuitive sense, because on one level, ESG can be simply about seeking to reduce risk (which can in turn improve financial returns) by avoiding some investments: 

Not investing in a company that's ignoring the costs associated with climate change.

Not investing in a company whose stance on social issues will cost its customers or drive its best employees to seek jobs elsewhere.

Or it’s not investing in a company that has poor governance and thus has a board full of the CEO’s stooges. Or one that bribes foreign government officials. 

Or it’s not investing in a company that has poor labor relations. (Boeing’s recent product safety issue springs to mind when a panel blew out of one of its 737 Max 9 jets … in the middle of a flight. That incident caused its stock prices to tank.)

ESG can also be about proactively investing in companies as well: For example, one whose business is to combat climate change. (Seems like a pretty good business opportunity to us, given how hot planet Earth is getting.) Or it can be proactively investing in a company with a diverse workforce or leadership team (which the research tells us drives higher returns on equity, lower risk, greater innovation, greater client engagement, greater employee engagement — and thus compelling investment performance over time). There is no immutable law of nature that these companies will underperform big carbon emitters, gun manufacturers, or companies with all-pale, all-East-Coast, all-male leadership teams; or even the broader stock market. 

We believe the consideration of ESG factors is in fact so core to determining the future risks and returns of an investment that it is integral to fulfilling one’s fiduciary duty. So much so that one could argue that the New Hampshire bill doesn't “prioritize investment returns and minimize risk in fulfillment of their fiduciary duties,” but instead de-prioritizes investment returns and increases risk, keeping them from fulfilling their fiduciary duties. In our opinion, states that do not allow ESG investing risk lowering their financial returns and costing taxpayers millions and billions.  

At Ellevest, we recognize that every dollar we each invest (or spend or donate) has an impact. That we are, in fact, all impact investors, whether we recognize the impact we are making or not, whether we’ve ever thought about it or not, whether our investments are in companies aligned with our values or happen to be those that directly oppose our values. 

This is why we’ve built ‌an impact offering that helps our clients be intentional in the impact they’re making, whether they invest their first-ever dollar through our digital investing offering or tens of millions with our wealth management services. 

Unlike *looks around* so many traditional investment companies, Ellevest offers investments to our clients who want both financial returns and positive impact. Because when companies are doing the right things for women, there's a positive ripple effect. Economies grow. Communities improve. The world gets more sustainable

When women thrive, everyone thrives.

At Ellevest, we believe that impact investing is the future of investing. Why? Well, in addition to the financial and impact returns it can provide, it’s also because women investors are most drawn to it: Some 79% of women express an interest in investing for a positive impact. And with women inheriting trillions of dollars in the Great Wealth Transfer, it's a fair bet that impact investing will experience rapid growth.

And it’s estimated that global ESG assets are on track to hit $50 trillion by 2025. That’s trillion. With a “t” — regardless of whether the good people in the New Hampshire legislature approve.

Sallie Krawcheck Signature

CEO and Founder Sallie Krawcheck

Dr. Kwan Signature

Chief Investment Officer Dr. Sylvia Kwan

If you don’t invest in the impact and issues that matter to you, who will? To learn more about Ellevest and how we help our clients build their wealth with a values-aligned investment strategy, you can schedule a call with us here.


*ESG investing, impact investing, values-based investing, socially responsible investing: there are a lot of terms and approaches out there. But what unites them is that each looks to invest with consideration of non-financial factors that will ultimately impact financial returns. Like how a company is positioned for climate change, or how it may be impacting climate change. Or, in the case of gender lens investing, taking into account gender-based factors to advance gender equality.

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CEO Sallie Krawcheck & CIO Dr. Sylvia Kwan

Ellevest CEO Sallie Krawcheck and Chief Investment Officer Dr. Sylvia Kwan are on a mission to get more money in the hands of women.