came to the defense (sort of) of ESG investing yesterday in the latest part of the back-and-forth debate stirred up two weeks ago by BlackRock chief Larry Fink's annual letter
In a letter to the Wall Street Journal
(published online yesterday and in today's morning paper), Bogle responds to a week-old op-ed
by former hedge fund manager Andy Kessler
. Kessler pushed back against Fink and others who are pushing for a "new model of corporate governance" that actively engages investors and looks at issues besides profits. Yet Kessler sees such ideas impeding the ability of investors to succeed where it counts.
"In reality there is no trade-off of Vice vs. Nice," Kessler writes. "There are only returns."
Bogle's defense is, well, classic Bogle. The Vanguard founder agrees that the average "corporate social responsiblity" (CSR) (also known as SRI, i.e. socially responsible investing, or ESG, i.e. environmental social and governance) fund trailed the S&P 500's returns by 0.7 percent. Yet he notes that the average actively managed, non-CSR large-cap fund trailed by 0.8 percent. (There's no comparison with any S&P 500-tracking fund, only the index, which of course is theoretical and doesn't include fees.)
"There may be valid objections to CSR funds, but over the past decade they've performed slightly better than their non-CSR peers," Bogle writes. "The S&P 500 remains a tough standard for all active managers to outpace."
So, the way Bogle sees it, CSR/ESG/SRI may fall short of the theoretical index, but it's better than traditional active management.
also published two other letters responding to Kessler's op-ed: one from Len Wasserman
of the Rockefeller Family Fund
, who defends divesting from oil and coal companies; and another from Chris Horner
of the Energy & Environment Legal Institute
, who describes the "social investing" industry as embodying "the darker attributes of the climate and environmental industries."
Neil Anderson, Managing Editor
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