Why that green fund you bought might include a coal miner

NEW YORK (AP) — Environmentally conscious investing received a lot of attention last week after the world’s largest asset manager said it plans to put climate change and sustainability at the center of its investment approach.

The decision by BlackRock Inc. should create more investment opportunities for those interested in funds that take environmental, social and governance issues into account — known as ESG funds — before they buy a stock or bond. Billions of dollars are already flowing into such funds — $20.6 billion last year, up from nearly $5.5 billion in 2018.

Green investing isn’t as simple as it sounds, however. Just because BlackRock or any other fund manager slaps an ESG or sustainable label on a fund doesn’t necessarily mean it completely syncs with an investor’s priorities.

“I don't think these things have been very well defined so far,” said Chester Spatt, finance professor at Carnegie Mellon's Tepper School of Business and former chief economist at the Securities and Exchange Commission. “ESG investing is emerging and increasingly important, and I think this will be a first-order issue on regulators' agenda in the next few years."

Here's what investors should know about this type of investing:

— WHAT DO ALL THESE ACRONYMS LIKE ESG AND SRI MEAN?

These two get used interchangeably sometimes, but “environmental, social and governance” investing can be quite different from “socially responsible investing.”

ESG is the more popular acronym now, and it implies managers consider companies' performance on the environment, social issues and corporate governance before investing in them. The thought is to avoid companies with poor track records on ESG issues that could be exposed to big potential fines or other blow-ups in the...