So-called ESG investing has become quite popular nowadays. Everyone from leading financial institutions to retail investors is so on board that the term might be thought to stand for “effective solutions guaranteed” rather than “environmental, social and governance” investment, but ESG is no panacea. Unlike Europe and the United States, China is experiencing a fairly slow transition to ESG. Its relatively cautious approach to this essentially market-driven way of achieving social and economic goals may be vindicated, though, if ESG proves less effective than a more state-led approach. ESG claims to represent trillions of dollars of equity and debt funds under management. The danger is that, worthy though its basic aims are, it could distract private investors from the need to supply funds to finance critical economic and social projects by more direct routes. Even before the advent of Covid-19, the United Nations had identified the need for colossal investments in its Sustainable Development Goals (SDG) that could cost anything up to US$70 trillion in total during the next 10 years. The Covid-19 pandemic will increase this sum as advanced and developing nations engage in a desperate struggle to provide better medical facilities, sanitation and other essential physical infrastructure, let alone tackling climate change, poverty and myriad other challenges. For a long time, portfolio investors regarded socio-economic spending as the province of governments. This began to change with the advent of a generation of millennials who were more socially conscious than their elders and who wanted to engage in “sustainable” investing. They faced a confusing variety of “sustainable, responsible, ethical and green” investments until then US secretary general Kofi Annan took the lead and invited CEOs of the world's leading firms to adopt ESG investing. No one can reasonably argue with the principles of ESG, which are environmentally and socially responsible business investing and good corporate governance. However, these principles do not in themselves guarantee concerted corporate action in pursuit of essential economic and social goals. In 2015, the UN identified a more specific approach in the shape of 17 Sustainable Development Goals. These cover areas such as averting climate change, providing or improving energy and water supply, boosting health and medical services improving sanitation and so on. Most of the UN's member governments signed on to these goals, which are very ambitious in terms of scope and cost. There was no precise indication as to who should pay for and implement them, though, beyond a broad agreement that the public and private sectors should split the burden between them. This is arguably where the sustainable investment movement began to go astray. In effect, it left to the private sector the task of deciding how such burden-sharing could be achieved. The result was the growth of the ESG movement and of halfway-house solutions such as “ impact investing ”. There is no shortage of private savings to finance socio-economic goals such as those enshrined in the development goals. UN and other estimates put the sum at approaching US$300 trillion, but if even a part of these are to flow into such goals, investors need to be offered more direct entry routes than ESG. Impact Investing 101 for Hongkongers: put your money where your mind is If the UN had urged public-private sector cooperation to set up “sustainable development funds”, rather than simply goals, that would have been a big step forward. It would have required governments and multilateral development agencies to provide a pipeline of projects and markets to help finance them. It would not be beyond the ability of financial markets to find ways of packaging and securitising debt and other securities issued by special SDG agencies and to market them to the pension funds and others seeking alternative assets, or to retail investors via exchange traded funds. Such investment funds do not exist, however, on anything like the scale that is needed to channel private savings into areas such as pandemic control, climate change alleviation, environmental protection and other social and economic goals. Meanwhile, ESG has come to be all the rage among everyone from companies seeking share price-boosting “sustainable” investor status to leading institutional investors wishing to appear socially conscious. Investors have decided that ESG is the way of the future when, in fact, it is not. All this could create a huge missed opportunity as the need for life-preserving social and economic investment projects is enormous. The irony is that governments are pumping out funds to distressed firms without using these avenues to leverage private-sector investment into better channels. China has given most of its attention so far to so-called green bonds which do link investments with specific projects, even if some of those projects appear to be “ greenwashed ”. State capitalism may provide a way forward if market capitalism cannot get its act together to save lives and the planet. Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs