When ESG Investing Looks an Awful Lot Like Gambling

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Last year, the UK’s Financial Conduct Authority issued a warning about investing apps: The “game-like elements” some of them come with — badges, points, leader boards, fun post-trade messages — might contribute to “problematic, even gambling-like, investor behavior.” There’s new legislation coming down the line, warned the regulator, so firms relying on gamification to get people trading might want to be “reviewing their products now to ensure they are fit for purpose.”

That’s about as strong an implicit threat as you get from the FCA, so I imagine there is plenty of conversation underway about what level of gamification is a good thing (it engages a new audience) and what is a bad thing (it makes that audience borrow money and use it stupidly). But if the regulator is really worried about an epidemic of gambling in the stock market, I wonder if they are looking in the right place.

The UK’s young people, after all, seem remarkably sensible with their investments: They mostly have auto-enrollment pensions (presumably invested in mildly overpriced but unadventurous open-ended funds by their providers), and they seem increasingly attracted to low-cost index funds with the money they invest elsewhere.

Vanguard notes that 74% of the clients it sighed up in the UK last year were under 45 and 41% were under 30. Vanguard products are fine, but there are no dopamine hits here. Hargreaves Lansdown, the UK’s most well-known investing platform — and one that does not offer in-app points — has also reported a rise since the pandemic in the number of younger investors opening accounts. Those who open HL accounts aren’t usually in it to top trader leader boards.

So who should the FCA be looking to if it’s not an easily led and irresponsible young? Let me suggest the professional fund managers.

Just look at what they’ve been up to. These are the people who (should) know that valuations matter — it’s the price you pay for an asset…

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