Having grown up in Italy, I internalised some Catholic principles that came with my upbringing, one being the idea that doing the right thing is never easy. It's not supposed to be: you have to prove yourself among the righteous if you want to go to paradise.
In investing, trying to do good with your money doesn't come with such a clear incentive as eternal bliss; the most you can get out of it is feeling a little bit better about yourself.
A friend of mine who has environmental, social and governance (ESG) principles particularly at heart confessed that trying to stay on top of her investments causes her to mentally break down every other week. And she’s not alone: in the past few years being an ESG investor has been purgatory, to be generous.
Broadly speaking, ESG investing can operate on three levels. Exclusion screens out the obvious offenders – tobacco, cluster munitions, sometimes oil and gas. Best-in-class picks the least bad option within a sector: the energy company with the strongest emissions disclosures, not a clean-energy pure play. Impact investing goes further, targeting measurable social or environmental outcomes with your capital. Each level is more demanding than the last, and each one is harder to verify.
The verification problem is the part that troubled me. It requires an incredible knowledge of markets, companies and supply chains that’s beyond most everyday investors.
Exclude oil and gas, fine. But the solar panels that replace it run through polysilicon factories in Xinjiang, where the evidence of forced labour is extensive and well-documented. The wind turbines uses dodgy cobalt supply chains in the Democratic Republic of Congo. Electric vehicles depend on lithium extraction with its own land-rights controversies. Where do you draw the line?
And then there’s returns. ESG funds typically overweight technology and healthcare while underweighting or excluding traditional energy, defence and commodities. After Russia invaded Ukraine in 2022, energy prices surged, defence stocks re-rated sharply across Europe and anyone who had screened those sectors out absorbed the penalty. ESG funds, as a group, lagged.
It happened again in 2025. As Trustnet reported earlier this year, the average ethical and sustainable fund returned 10.3% last year against 12.2% for the average conventional peer, an underperformance of 1.9 percentage points. Defence and commodities were again among the year's strongest performers and, as before, ESG-screened portfolios couldn't get anywhere near them. How much pain are you willing to take, and for the expiation of whose sins?
It can be argued as well that the big players – those that can have the largest impact – lack commitment to ESG. Vanguard left the Net Zero Asset Managers (NZAM) initiative in 2022, partly on the grounds that net zero commitments are harder to apply to index investing – a problem equally relevant to BlackRock. In January 2025, BlackRock left too.
Goldman Sachs, Wells Fargo, Bank of America, Citi, Morgan Stanley and JPMorgan Chase left the banking version weeks before. In each case, the stated reason was legal exposure: anti-ESG groups had brought antitrust challenges against these alliances, arguing they were anti-competitive and harmful to fossil fuel markets.
BlackRock's departure came with a reassurance that nothing about how it managed money would change.
This is another point where I cannot turn the other cheek. If the institutions with compliance departments and audit budgets in the billions decided the commitment wasn't worth the headache, it's hard to see what's left for an individual investor to be the custodian of.
It's like recycling or flying. When I separate my plastic from my glass and take the train from London to Edinburgh instead of flying (at roughly three times the cost) I do ask myself how many redemption tokens I need to collect to reach sustainability paradise – and what that even is, and if there is one or not.
My heart sank when I recently read a statistic that, water usage considered, a single-use plastic cup can have a smaller footprint than a ceramic mug washed after every use. China stopped buying most of the world's recycled plastic years ago, so a fair chunk of what goes in the recycling bin in the UK doesn't get recycled at all. The maths on doing the right thing doesn't always point where you'd expect.
ESG investors are required to think hard about how to invest exactly and where individually, they want to draw the line. I admire those who only want to do good with their money, but I just cannot bring myself to fully commit because of all the complexities and the never-ending snakes and ladders along the way.
Like with recycling and flying, I end up blaming regulators, auditors and policy makers for why I sometimes feel my actions can fall out of line with my principles. It’s hypocritical. But if the likes of BlackRock walk away from its own commitments, my ISA was never going to be the thing holding the line, let alone getting me to paradise.
My views sparked some debate in the Trustnet team, so next week's comment will make the counter-argument. We also speak to fund managers on ESG regularly – if there is anything you'd like answered, send your soul-damning questions to one of us.
Matteo Anelli is deputy editor at Trustnet. The views expressed above should not be taken as investment advice.