The environmental, social and governance (ESG) landscape continues to evolve. This article examines whether short selling non-ESG focused companies can come with a benefit or not, noting differences between the US — where ESG remains a market-driven and largely voluntary concept — and the EU, where a first generation of regulation and guidance is about to be updated. As US regulators focus on disclosure and definitional issues for ESG, this type of data and inputs can certainly inform and enhance the discussion.
“In the U.S., there’s a little bit more flexibility, a little bit more openness to shorting the bad companies,” Furdak said. While some asset owners are willing to “embrace the dark side of ESG,” he said others are more aligned with the typical European investor’s opposition to short selling “undesirable” companies.