How green investors fail the volatility test

When prices are flying, most sustainable investing commitments go out the window, study finds

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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — In times of crisis and fast-moving prices, many socially responsible investment professionals behave no differently than the most profit-obsessed Wall Street trader.

That is the depressing conclusion of a recent trading experiment that was designed to test whether ESG professionals do more than just talk the talk.

The experiment was designed by an internationally diverse group of researchers at the University of Houston, University of Hamburg, University of Geneva, University College Dublin, and the Henley Business School of the University of Reading. The research is titled “Do ESG Preferences Survive in the Trading Room? An Experimental Study” and began circulating in academic circles in February.

The researchers recruited over 100 investors to participate in a trading tournament, the winner of which — who would be widely publicized — would be the person who generated the highest absolute profit. Participants came from varied backgrounds, and prominently included socially responsible investment (SRI) professionals from firms that were signatories to the “Principles for Responsible Investment.”