Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

ESG, or environmental, social and governance investing, is one of the hottest things in markets right now,

with large fund managers competing to be seen to take ESG more

seriously than the next.

Setting aside any moral judgments, the commercial rationale for the investment management

industry is pretty clear.

ESG funds have attracted about $350 billion over the last two years, almost twice as much as the rest of the stock fund

universe combined. In the first six months of 2021, more ESG-related bonds were issued than in the

full year of 2020, and while the sector still represents a tiny slice of the bond market overall, it appears to

be growing quickly.

More than 17% of bonds issued last month were labeled as being socially responsible, sustainable

or green, according to Bank of America.

Saudi Arabia's public investment fund has even gotten in on the ESG

trend, having announced that they are considering their first issuance of green bonds.

Now I'm sure you can do green investments in Saudi Arabia, and lots of investors would be delighted

to get involved in this. After all, Saudi Arabia is a great credit due to all of their

oil wealth. I'm not entirely sure how ESG scores work, but I imagine a country with an

unelected leader who occasionally kidnaps his critics abroad, tortures and dismembers them,

will lose a few ESG points, but at least they're showing a commitment

to the energy transition. Now the opposite of ESG investing is investing in sin stocks or vice

investing, a term for investing in companies that engage in a business or industry that's

considered unethical, immoral or unsavory.

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