FEVR - ESG controversy rages on as faith-based ETF issuer removes ESG labels

Environmental, social and corporate governance ETFs have seen rising controversy over the last few years, as firms continue to roll out offerings in the space even while certain pockets of the investment community get more vocal in their opposition to the sector.

The latest salvo in this battle came from Inspire Investing, a Christian faith-based fund provider that has detached all ESG labels from its ETF lineup. The company attributed the move to "intolerant liberal activists" who have "weaponized" the idea of ESG investing.

"We hereby renounce ESG," Robert Netzly, the founder and chief executive of Inspire Investing, said in blog post. "Hard-left activists were seeking to strong-arm companies into acquiescence with their extremist policies."

Inspire Investing ETFs consist of: ( NYSEARCA: BIBL ), ( NYSEARCA: BLES ), ( NYSEARCA: FDLS ), ( NYSEARCA: FEVR ), ( GLRY ), ( IBD ), ( ISMD ), ( RISN ), and ( WWJD ). Previously, some of these offerings included ESG in the name and marketing but that language will now be removed from the ETFs.

The firm began its "faith-based ESG" push in 2019, according to Netzly, but has faced what the Inspire Investing CEO characterizes as "burning intolerance" from others in the ESG community.

"We have been ridiculed by the liberal media, antagonized at ESG industry events, blocked from databases of ESG investment options and received countless agitated emails and phone calls," Netzly said.

While Inspire attributed its decision to drop the ESG model to a tension between the overall ESG community and its faith-based approach to investing, others have leveled separate complaints about ESG.

For instance, New York University professor Aswath Damodaran, a Seeking Alpha contributor, has criticized the ESG movement on financial grounds. He has argued that ESG advocates typically underplay the costs associated with reforms, papering over the drop in yield ESG funds can see by excluding certain investment opportunities.

Damodaran told CNBC last year, "If I add a constraint to my investment policy, no matter what it is, you can't tell me that adding a constraint gives me a better outcome than not having the constraint."

Even amid this criticism, the crowded field of ESG offerings continues to grow, evidence that a sizable portion of the investment community is still interested in the sector. For instance, Morgan Stanley recently announced that it was entering the world of ETFs for the first time, with its initial lineup including four ESG ETFs .

Elsewhere, Vanguard revealed additions to its ESG lineup , with two funds that will trade in Europe. The ESG family also received a new offering from TD Asset Management, which unveiled a carbon credit ETF earlier this week.

These funds join a thriving market of well-established, ESG-related names. The sector includes large funds like Vanguard ESG U.S. Stock ETF ( ESGV ), Invesco ESG S&P 500 Equal Weight ETF ( RSPE ) Invesco ESG NASDAQ 100 ETF ( QQMG ) and Invesco ESG NASDAQ Next Gen 100 ETF ( QQJG ), SPDR S&P 500 ESG ETF ( EFIV ) and iShares ESG MSCI USA ETF ( ESGU ).

For investors that are anti-ESG there is the Constrained Capital ESG Orphans ETF ( ORFN ) which aims to deliver the investment community access to equities that fall outside of the traditional ESG standards.

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