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Comment by throwawa14223 | Hacker News Reader

As far as I can tell ESG is a huge 'begging the question' problem. Companies with good ESG scores do better because we invest in companies with good ESG scores.

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But shouldn't the "free market" correct for this? If most people are putting their money into ESG but there isn't a real underlying performance difference, that creates an arbitrage opportunity for people willing to invest in non-ESG?

Sadly, I can already hear the right-wing rebuttal: "the market isn't truly free because of the (bankers) running blackrock! we need govt intervention to ban ESG, then the market will be truly free!"

The market isn't free because Vanguard and BlackRock are a duopoly on this. Vanguard isn't the issue though - they do literally nothing besides harvest tiny tiny fees at scale.

BlackRock is a different story - look into their actions around SFH. They're not great.

Fidelity is also another player, as is State Street. And like you stated, Fidelity is still akin to Vanguard while State Street is akin to Blackrock.

>But shouldn't the "free market" correct for this?

It probably will. It will just take many years for this bubble to pop.

I think we can conclude that market isn't efficient. There is enough of big enough players that don't even try to invest in optimal manner. Think of pension funds and Sovereign wealth funds. If those are moved to invest ESG related it will naturally drive ESG up.

And really I think whole market is not in sensible shape in general and has not been for a while. Not that crash is imminent or can't be kicked down the road a few more times.

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