Advocates of ESG (environmental, social and corporate governance) investing have long argued that investors cannot afford to ignore unethical financial practices. The recent share price woes of British online retailer Boohoo, following revelations of poor working conditions at Leicester garment factories, testifies there is indeed a financial as well as a moral case for ESG.

It’s unfortunate, then, that multiple ESG funds completely missed what was going on. Many suffered serious losses following Boohoo’s share price collapse. Indeed, Boohoo was until recently the largest holding in one such fund, Aberdeen Standard Investments’ Employment Opportunities Equity Fund. This was a mess that was waiting to happen. There are no agreed standards as to what constitutes ESG, with different rating firms using different criteria.

This lack of standardisation, notes investment analyst and blogger Joachim Klement, means companies are free to choose which metrics they want to publish. ESG rating agencies often issue their rating scores based on available data and ignore the missing data, allowing companies to potentially game the system.

It’s too early to say if that happened at Boohoo, where an investigation is under way. Still, the fact Boohoo had an average ESG score of 71, meaning it was “better” than 71 per cent of stocks globally, suggests the ESG industry really needs to up its game.