Do ESG and sustainable funds actually reduce my exposure to risky industries?

They can, but with big caveats. ESG funds screen companies on environmental, social, and governance criteria, so a fund might exclude fossil fuels, tobacco, or weapons, which shifts your exposure. However, ESG definitions vary widely between fund providers, so two ESG funds can hold very different companies, and some include names you might not expect. Critics point to greenwashing, where a fund markets itself as sustainable while holding conventional stocks. Morningstar and regulators have pushed for clearer ESG labeling for this reason. If you want your money to reflect your values, read the fund's actual holdings and methodology rather than trusting the label. Expect somewhat higher fees, and understand that ESG screening changes your risk profile in ways that may or may not match your intentions.