Who killed the ESG party? | FT Film

Summary

El guion explora el concepto de ESG (Responsabilidad ambiental, social y de gobernanza) y su influencia en la inversión y el capitalismo. Se cuestiona si ESG fue solo un ejercicio de marketing o si cambió la forma en que se gestionan los fondos de pensiones y ahorros. Se discuten las dificultades de medir el impacto de ESG y la confusión entre el manejo de riesgos y la estrategia de inversión. La discusión destaca la necesidad de una transformación económica para abordar los desafíos climáticos y la oportunidad de obtener ganancias a través de la inversión en tecnologías verdes.

Takeaways

• 🌐 ESG (Responsabilidad Social Empresarial, Medio Ambiente y Gobierno Corporativo) se ha convertido en un tema de gran interés, pero su popularidad parece haber decrecido en 2024.
• 💼 La filosofía detrás del ESG es invertir de manera que promueva el ambiente, los objetivos sociales y una buena gobernanza corporativa.
• 📉 El término ESG se hizo popular tras los Acuerdos de París en 2015, pero su relevancia ha disminuido en conversaciones, según el CEO de un gran fondo de inversión.
• 🌍 El cambio en el enfoque de ESG se nota más en Estados Unidos que en Europa, posiblemente debido a diferencias en la percepción del cambio climático y la economía energética.
• 🤔 La hipérbole de ESG ha llegado a su fin, y se sugiere que el enfoque debería ser más directo en la reducción de emisiones y acciones sostenibles, en lugar de solo declaraciones.
• 🛑 La invasión de Ucrania por parte de Rusia y el aumento de los precios de los hidrocarburos han afectado el rendimiento de las estrategias de inversión ESG y han cambiado la perspectiva hacia la seguridad energética.
• 📊 La medición y calificación de la sostenibilidad a través de ESG es controvertida y puede ser diferente según la agencia que lo evalúe, lo que genera confusión en los inversores.
• 💡 ESG no es solo una cuestión de 'hacer el bien', sino también una cuestión de gestión de riesgos y consideración a largo plazo para los inversores.
• 📉 Las corrientes de fondo hacia los fondos de inversión sostenible varían geográficamente, con Europa mostrando un mayor compromiso que los EE. UU.
• 🚫 El término ESG puede estar pasando de moda, lo que podría ser positivo si lo que realmente importa es la integración de la sostenibilidad en las prácticas de inversión.
• 🔮 Se predice que el enfoque en ESG evolucionará para enfocarse más en la ética y el rendimiento financiero, en lugar de solo ser una moda o un marcador de virtud.

Q & A

¿Qué es ESG y cómo se refiere a la evolución del capitalismo?

ESG son las siglas de 'Environmental, Social, Governance', que se refiere a la forma en que las inversiones se realizan teniendo en cuenta el impacto en el entorno, las cuestiones sociales y la gestión corporativa. Se considera la siguiente evolución del capitalismo porque busca una forma de hacer negocios que no solo genere ganancias sino que también promueva el bienestar social y ambiental.

¿Por qué se dice que el ciclo de la fama de ESG ha terminado?

Según el guion, el ciclo de la fama de ESG ha terminado porque ya no se menciona en conversaciones y ha llegado un punto de desilusión. Las expectativas y el entusiasmo que rodeaban a ESG anteriormente han disminuido, y se está considerando que puede haber elementos del concepto que sean más una cuestión de marketing que de soluciones reales a los problemas ambientales y sociales.

¿Cómo se relaciona ESG con el riesgo financiero a largo plazo?

ESG se relaciona con el riesgo financiero a largo plazo porque factores como el cambio climático, la gobernanza corporativa y las prácticas sociales de una empresa pueden tener un impacto significativo en su valor y estabilidad a lo largo del tiempo. Por lo tanto, invertir considerando ESG es una forma de gestionar riesgos y proteger los retornos financieros a largo plazo.

¿Qué evento significativo marcó un punto de inflexión para la industria ESG?

La invasión de Ucrania por parte de Rusia fue un evento significativo que marcó un punto de inflexión para la industria ESG. Este conflicto generó un enfoque más en la seguridad energética en lugar de las preocupaciones climáticas y condujo a un rendimiento inferior de las estrategias ESG en comparación con el mercado general impulsado por las acciones de petróleo y gas.

¿Qué papel ha jugado el periodista Tucker Carlson en la recepción de ESG en los Estados Unidos?

Tucker Carlson ha sido instrumental en liderar un rechazo político en los Estados Unidos contra ESG, argumentando que ha llevado a consecuencias negativas como la racionamiento de electricidad en Alemania y la revuelta de agricultores en Holanda. Su influencia ha movido la aguja política y ha generado una mayor escrutinización de ESG por parte de políticos prominentes y el público en general.

¿Por qué algunos inversores ESG podrían haber tenido un rendimiento inferior durante un período de tiempo?

Algunos inversores ESG podrían haber tenido un rendimiento inferior debido a eventos geopolíticos como la invasión de Ucrania por Rusia, que elevaron los precios de los hidrocarburos y dieron mayor énfasis a la seguridad energética, lo que desplazó la atención de las preocupaciones climáticas. Además, la subdesempeñó del sector energético en comparación con otras áreas del mercado podría haber impactado negativamente los resultados de las estrategias ESG.

¿Qué implicaciones tuvo el escándalo de Wirecard para la percepción de ESG en el sector de la inversión?

El escándalo de Wirecard, donde una empresa con problemas financieros graves fue clasificada como una buena opción de inversión ESG por DWS, dejó una impresión negativa sobre la credibilidad de las clasificaciones ESG y la integridad de las afirmaciones de los gestores de activos sobre sus prácticas sostenibles.

¿Cómo la regulación podría influir en el futuro de las clasificaciones ESG?

La regulación podría influir en el futuro de las clasificaciones ESG al enfocarse en los ingredientes utilizados para generar una clasificación, en lugar de las opiniones mismas. Esto podría incluir la necesidad de transparencia y coherencia en los métodos de medición y la inclusión de información relevante para los inversionistas.

¿Por qué es difícil medir el impacto de una inversión ESG?

Es difícil medir el impacto de una inversión ESG debido a la variedad de factores ambientales, sociales y de gobernanza que pueden influir en una empresa y su rendimiento. Diferentes inversionistas pueden valorar estos factores de manera diferente, lo que resulta en opiniones y clasificaciones variadas.

¿Cómo la percepción de ESG ha cambiado con el tiempo según el guion?

Según el guion, la percepción de ESG ha cambiado de ser una moda y un enfoque de marketing a una consideración más seria y crítica. Ha habido un reconocimiento de que ESG no es simplemente una medida de la 'bondad' de una empresa, sino una herramienta para invertir de manera a largo plazo y sensata, considerando factores que pueden afectar el rendimiento financiero y la sostenibilidad de la empresa.

¿Qué papel juegan las generaciones más jóvenes en la percepción y el futuro del capitalismo sostenible?

Las generaciones más jóvenes, como los milennials y el Gen Z, tienen una actitud más escéptica hacia el capitalismo tradicional y están más inclinadas hacia la sostenibilidad. Esta actitud puede influir en el futuro del capitalismo al buscar inversiones y prácticas empresariales que se alineen con sus valores y la necesidad de abordar desafíos globales como el cambio climático.

¿Qué desafíos y oportunidades presenta la transformación económica hacia prácticas sostenibles?

La transformación económica hacia prácticas sostenibles presenta desafíos como la necesidad de crear nuevos estándares de rendimiento bajo carbono y la transición de las industrias existentes. Sin embargo, también ofrece oportunidades para aquellos que pueden innovar y adaptarse a estas nuevas condiciones, pudiendo ser parte de una de las mayores transformaciones económicas y oportunidades en la historia de la civilización humana.

Outlines

00:00

🌐 El cíclo de la hipnosis ESG ha terminado

El primer párrafo explora la evolución del enfoque ESG (Environmental, Social y Governance) en la inversión, cuestionando si fue solo un ejercicio de marketing sin sustancia o si realmente cambió la forma en que se gestionan las inversiones y los ahorros. Se discute la hipótesis de que ESG es la siguiente etapa del capitalismo, con el objetivo de invertir en empresas de manera que beneficie al entorno y a la sociedad, y que promueva una buena gobernanza corporativa. Sin embargo, se señala que el interés en ESG ha disminuido significativamente desde su punto máximo en 2021, sugiriendo que el ciclo de la hipnosis ESG ha concluido y que esto podría llevar a un lugar mejor debido a una reflexión más profunda y auténtica sobre la inversión sostenible.

05:01

🌪 Impactos políticos y económicos en la inversión ESG

Este párrafo examina los factores que han influido en el cambio de percepción sobre la inversión ESG, destacando la invasión de Ucrania por parte de Rusia y cómo esto afectó los precios de los hidrocarburos y la seguridad energética. Se menciona cómo los eventos geopolíticos y la tensión han llevado a una mayor preocupación por la seguridad energética en lugar de la lucha contra el cambio climático. Además, se señala el papel de figuras públicas como Tucker Carlson en la reacción política de EE. UU. contra el ESG, y cómo esto ha llevado a una disminución en la promoción de ESG por parte de instituciones financieras.

10:05

📉 Desempeño y resistencia al cambio en la industria de activos

El tercer párrafo profundiza en la resistencia al cambio dentro de la industria de activos, especialmente en EE. UU., donde la presión política y la preocupación por el rendimiento financiero han llevado a una mayor cautela con respecto a la inversión ESG. Se discuten las acciones de某些 financieros como BlackRock y su postura frente a las críticas y la presión política, y cómo esto ha influido en su enfoque hacia el ESG. Además, se menciona la importancia de la medición y la transparencia en la industria de ESG, así como las dificultades para medir y demostrar el impacto positivo de las inversiones.

15:08

🔍 La problemática de la medición y la ética en la inversión ESG

Este párrafo aborda la dificultad de medir y calificar la sostenibilidad en las inversiones ESG, señalando la disparidad entre las afirmaciones públicas de las empresas y sus prácticas internas. Se menciona el caso de Wirecard y cómo su insólvencia y escándalos de gobernanza corporativa contradjeron su alta calificación ESG dada por DWS. También se discute el papel de los whistleblers como Desiree Fixler en exponer la greenwashing en el mercado y cómo esto ha contribuido a la caída del interés en ESG.

20:10

🚫 La crítica y la regulación de la industria ESG

El quinto párrafo explora las críticas y la necesidad de regulación en la industria ESG, enfocándose en la falta de claridad y coherencia en la medición de la sostenibilidad. Se discute cómo la opinión pública y la regulación pueden influir en la forma en que se asignan recursos y se toman decisiones de inversión. Además, se destaca la importancia de la diversidad de opiniones en el proceso de inversión y cómo la regulación debe centrarse en los ingredientes que se utilizan para crear una calificación ESG en lugar de las opiniones mismas.

25:10

🌿 La transformación económica y la sostenibilidad en la inversión

El último párrafo reflexiona sobre el futuro de la inversión sostenible y cómo la sostenibilidad se convertirá en una parte integral del proceso de inversión en lugar de un término separado. Se argumenta que la inversión en tecnologías verdes y la transición a una economía post-fósil son no solo responsabilidades éticas sino también oportunidades de ganancia económica. Se señala la importancia de la innovación y la adaptación a los cambios económicos y ambientales para asegurar una futura prosperidad sostenible.

Keywords

💡ESG

ESG se refiere a un enfoque de inversión que considera los aspectos ambientales (Environmental), sociales (Social) y de gobernanza corporativa (Governance). En el video, ESG es central ya que se discute cómo ha impactado en la forma en que las personas invierten, incluyendo fondos de pensiones y ahorros. Se menciona que ESG puede ser una evolución del capitalismo y cómo ha cambiado o no la práctica de la inversión.

💡Capitalismo

El capitalismo es un sistema económico basado en la propiedad privada y la libre empresa. En el video, se sugiere que ESG podría ser la 'próxima evolución del capitalismo', lo que implica una adaptación del sistema para abordar problemas sociales y ambientales mientras se mantienen las prácticas de lucro.

💡Marketing

El término 'marketing' se refiere a la promoción y venta de productos o servicios. En el contexto del video, se cuestiona si el enfoque ESG ha sido utilizado más como una táctica de marketing sin un cambio real en las prácticas de inversión, sugiriendo que puede haber sido una 'exercicia de marketing sin sentido'.

💡Hidrocarburos

Los hidrocarburos son compuestos químicos encontrados en los combustibles fósiles como el petróleo y el gas natural. El video menciona cómo el conflicto en Ucrania y el aumento de los precios de los hidrocarburos afectaron la inversión ESG, ya que muchos inversionistas vieron una disminución en el rendimiento de sus estrategias ESG en comparación con el mercado general impulsado por las acciones de petróleo y gas.

💡Gobierno Corporativo

La gobernanza corporativa se refiere a la forma en que una empresa es dirigida y controlada. En el video, se destaca la importancia de la 'G' en ESG, enfatizando la necesidad de que las empresas tengan prácticas de gobernanza sólidas con equilibrios y controles adecuados para proteger a los inversores y a la sociedad en general.

💡Acuerdos de París

Los Acuerdos de París son un acuerdo internacional firmado en 2015 con el objetivo de limitar el calentamiento global. En el video, se indica que el término ESG se hizo popular después de estos acuerdos, lo que sugiere que las empresas y el sector privado deben contribuir a la reducción de las emisiones de gases de efecto invernadero.

💡Greenwashing

El greenwashing es la práctica de presentar una imagen ecológica o sostenible de una empresa o producto que no se justifica en la realidad. En el video, se discute cómo ESG se ha utilizado como una herramienta de marketing, insinuando que algunas empresas podrían haber exagerado sus credenciales ESG sin realizar cambios sustanciales.

💡Fiduciary Duty

La obligación fiduciaria es la responsabilidad legal y ética de un fiduciario, como un administrador de activos, de actuar en el mejor interés de sus beneficiarios. En el video, se discute cómo la consideración de ESG puede entrar en conflicto con esta obligación, especialmente si las inversiones ESG resultan en rendimientos más bajos.

💡Cambio Climático

El cambio climático se refiere a los cambios en los patrones climáticos a lo largo del tiempo, generalmente vinculado al aumento de las emisiones de gases de efecto invernadero. El video destaca cómo el cambio climático es una preocupación financiera y un riesgo para las inversiones a largo plazo, subrayando la importancia de la acción de las empresas y los gobiernos para abordarlo.

💡Sostenibilidad

La sostenibilidad se refiere a la capacidad de un sistema o proceso de continuar a lo largo del tiempo sin dañar el entorno o los recursos. En el video, se sugiere que la sostenibilidad será incorporada en cómo se realizan las inversiones en el futuro, más allá de la etiqueta ESG, y se enfatiza la importancia de invertir en tecnologías verdes para el bien de la humanidad y el planeta.

Highlights

ESG曾无处不在，但在2024年却变得鲜少被提及，引发了对其实际影响力的质疑。

ESG被视为资本主义的进化，关乎人类未来，但同时也被一些人视为一场价值数万亿美元的营销骗局。

ESG的热潮在2021年达到顶峰，随后进入幻灭期，人们开始质疑其背后的实质内容。

ESG的概念在2015年巴黎协定后变得流行，私人部门被认为需要在应对全球变暖中发挥作用。

挪威主权财富基金CEO Nicolai Tangen强调，作为长期投资者，关注气候和财务回报是至关重要的。

ESG投资策略在政治和媒体攻击下变得低调，特别是在美国，政治反弹对ESG产生了影响。

Tucker Carlson等媒体人士在将ESG拉入文化战争中心方面发挥了重要作用，影响了公众和政治家的看法。

一些资产管理公司，如BlackRock，因政治压力而减少了对ESG的公开讨论。

ESG的批评者认为，应对气候变化等挑战应由民主政府的政策来推动，而非仅靠市场自我调节。

资产管理行业对ESG的采用被视为机遇，但2024年美国的ESG基金出现了大量资金外流。

前BlackRock首席投资官Tariq Fancy成为ESG方法的公开批评者，强调了市场自我调节的局限性。

ESG评级提供商如MSCI面临争议，因为不同的评级机构对同一家公司的评级可能截然不同。

DWS的ESG前负责人Desiree Fixler作为告密者揭露了ESG实践中的问题，包括绿色洗钱和误导投资者。

ESG的概念被混淆了，它既被看作是风险管理的一部分，也被看作是公司对社会的积极影响。

HSBC资产管理前负责人Stuart Kirk因公开批评ESG而失去工作，这引发了对ESG批评的讨论。

尽管ESG一词可能不再流行，但可持续性将嵌入我们的投资过程中，成为投资决策的一部分。

年轻一代对资本主义持怀疑态度，他们对企业和政府在解决气候问题上的承诺持观望态度。

绿色转型提供了巨大的经济机会，投资于绿色技术是应对气候挑战的一种方式。

ESG不是关于做好事，而是关于成为一个长期的、明智的投资者，考虑气候变化等长期风险。

Transcripts

ESG was everywhere.

Now, 2024, tumbleweed.

Was it all just a meaningless marketing

exercise, or has the way people invest

our pensions and our savings, has that genuinely changed?

ESG is the next evolution of capitalism.

When we talk about ESG, we are talking

about the future of humankind.

The story of ESG is a multi-trillion-dollar marketing

scheme.

It's a story about hype, ambition.

Humanity responding to a set of inconvenient

truths with something short of real solutions.

The ESG hype cycle is over.

Those three letters may even disappear,

and we're going to move to a much, much better place because

of it.

ESG is trying to think of ways to invest money in companies,

whether they are company bonds or stocks, in a way that

helps the environment rather than hurts it,

in a way that advances social aims rather than harms them,

in a way that encourages companies to be governed

properly, soundly, with lots of checks and balances,

and with appropriate controls.

So the E is environmental, the S is social,

and the G is governance.

The term became trendy in the aftermath of the Paris

agreements in 2015 to keep global warming

well below 2 degrees above pre-industrial levels.

There was quickly a realisation that the private sector would

have to play its part in that.

I'm Nicolai Tangen and I'm the CEO of the Norwegian Sovereign

Wealth Fund.

We run $1.6tn and we own roughly 1.5 per cent of all the listed

equities around the world.

ESG is very, very important.

Climate is a financial risk.

Now, we are invested in all the companies across the world.

And so if one company pollutes we

will pick it up in the rest of the portfolio.

If you have a long-term view and you really

care about both the climate and the financial returns,

you have to care about these things.

There was a period, in the late 2010s,

when I couldn't pick up the phone or open up my email

without being bombarded with people just desperate to talk

to me about their ESG credentials.

And now, 2024, tumbleweed.

It does not come up in conversation at all.

The excitement around ESG reached its peak

in 2021; the COP26 climate conference in Glasgow in the UK.

There was a big announcement, the Glasgow Financial Alliance

for Net Zero.

Most of the biggest financial institutions

in the western world declared their support for efforts

to reach net zero carbon emission.

But there is a big difference between declaring one's support

and actually acting on it.

I feel the ESG hype cycle is over.

I think we are at that point of disillusionment.

The ESG party as we know it is over.

So I would think about the ESG industry as having produced some

good things that we need to keep, some bad things we don't.

ESG is here to stay, but it's not

going to be a linear journey.

The question is: who killed the ESG party?

There's a number of suspects.

Our first suspect is Vladimir Putin.

One of the really big moments for the ESG industry

was that invasion of Ukraine.

Higher hydrocarbon prices just following the Ukraine invasion.

The higher costs of capital with the increase in interest rates

have hurt the performance of ESG-driven strategies.

So if you're an ESG investor during that period

then you are dramatically underperforming

the wider market, which is being buoyed by oil and gas stocks.

Russia's invasion of Ukraine had the effect

of putting more focus on energy security and safety

rather than thinking about climate.

While markets were going up and everyone was safe,

we could spend all our time arguing about ES&G. As soon

as the world got scarier, add a bit of Covid

plus a bit of geopolitical tension, war, warheads,

invasion, tanks, suddenly, we all woke up and went,

boy, oh, boy, this stuff is immaterial compared to what's

going on in the real world.

Surely, it makes sense to help fund the companies that

provide the ammunition that countries need to defend

themselves from hostile actors.

And this was one of the things that made people think, hang on,

did these criteria actually make any sense?

People forget that the oil and gas sector, the energy sector,

has underperformed the S&P 500 for the last 10 years.

People keep waiting for the last hurrah.

When will it finally make me more money than my tech

investments?

And the war in Ukraine, you get this spike.

Get off of fossil fuels.

If they're the cause of the problems,

move quickly away from the cartel of fossil fuel providers

and move to this new system, wind and solar.

If you can capture it and store it

and you can make it at source, you

don't need to be transporting it around the world,

having wars intervening with your pipelines and so on.

Our next suspect is Tucker Carlson.

He was instrumental in leading this US political backlash

against ESG.

Because of ESG, Germany is now rationing electricity.

Because of ESG farmers are in revolt in the Netherlands.

Carlson is arguably more responsible

than any other individual for dragging ESG

into the heart of the culture wars.

Carlson helped to move the political needle in such a way

that we've now seen very high-profile politicians,

notably Florida governor Ron DeSantis,

talking about ESG all the time.

We've seen financial institutions

under really quite serious pressure,

through various means, including withdrawing billions of dollars

in portfolio assets from certain asset managers, which

is what some Republican state governments have been doing.

It's not really that surprising, therefore, that a lot of them

are at the very least going a lot quieter on all

this ESG promotional stuff.

Separately to GFANZ, there's been another initiative,

also very important, called Climate Action 100+,

asset managers using their clout to put pressure on the companies

that they invest in.

The first phase was very much focusing on disclosures.

Second phase was what companies were actually doing.

So we're no longer just talking about disclosing data.

We're talking about companies taking action

to reduce their emissions.

Some of the members, particularly US members,

BlackRock, JPMorgan Asset Management, Pimco, Invesco,

State Street, at this point they got worried.

It might not be in the interests of their clients,

of their investors, for these asset managers

to be telling all these companies

to reduce their emissions.

BlackRock, which is by far the biggest asset management

company in the world, became a central part of this story,

partly due to the role played by its chief executive, Larry Fink.

There was a period when he seemed

to be arguably the most prominent standard bearer

for ESG.

Larry's vision around how we can use the gears of capitalism

to fix its own shortcomings, capital

starts to flow towards more responsible providers

in society.

This was all a very alluring thesis, because you make money

and you improve the world at the same time.

BlackRock, and Larry Fink in particular,

became really central targets for those political and media

attacks, especially from the right.

BlackRock has certainly become less vocal around ESG.

In fact, Larry Fink now says that he

prefers not to use that term.

Do I think he's one of the bad guys?

I don't.

They've created some of the biggest clean energy funds

in the world that are making money for their investors.

That's their job.

They do that very, very well, with a lot of pressure on him

politically.

Yeah.

And did he fold a little bit?

Yes, he did.

But I think anybody under that kind of pressure

would have responded in the same human way.

In 2022, Northern Trust put out one of its regular surveys

to get an idea of what the priorities are

for asset managers.

And in 2022, at the start of that year,

before Russia's invasion of Ukraine,

ESG was top of the list.

2024, it has absolutely dropped down the list.

In Europe, there is far more support

from government regulations.

Public opinion is probably more positive on sustainability.

The oil and gas industry is simply

a bigger part of the economy in the US than it is in Europe.

There is a much higher proportion

of the population in the US who question

the science of climate change.

The change we've seen in the US is worrisome,

because there is less focus on the climate initiatives

that the companies take.

It has not changed the way we do our business.

We have roughly 3,000 meetings with companies every year.

We would discuss governance, and of course, also, climate.

We vote at roughly 12,000 AGMs every year on 120,000 proposals.

Even though we only account for 1.5

per cent of all the votes in the world,

we also see that we have roughly an additional 3 percentage

points of kind of additional influence, i.e.,

other shareholders who follow what we do.

And we've also seen, in terms of the flows of money,

we've seen bigger changes in the US than in Europe.

Some in the asset management industry saw the rise of ESG

as a great opportunity.

Inflows into ESG funds were really, really strong

on both sides of the Atlantic.

In the first quarter of 2024 we still saw inflows

into sustainability-focused funds in Europe to the tune

of something like $11bn, whereas in the US it was the single

worst quarter that Morningstar has recorded.

Nearly $9bn came out of sustainability funds.

E, S, and G are three letters that

do not leave your mouth if you are

on marketing trips across various states in the US,

if you're an asset management firm.

Do I think the big asset managers helped end the party?

No.

I think big asset managers smell the wind,

and if they think there's a backlash,

they'll be very, very fast to change course.

Tariq Fancy, previously the chief investment officer

for sustainable investing at BlackRock,

has since become a vocal critic of the approach

to ESG that's been taken in large parts of the asset

management and financial industry.

The ESG thesis around society improving because companies

discover social purpose, it's a free market self-corrects

thesis.

It's a neoliberal, the free market

will figure this out because people

will have new data frameworks and companies will start to do

the right thing on their own.

If you're a consumer-facing brand,

it's not a good idea to have a supply chain issue with slave

labour.

But for the majority of the companies in the economy

it doesn't really matter.

The reality is, they're going to do whatever the cheapest

thing they can do is, and they're

going to do that within the rules.

And I don't think that we should impugn business people

for making the decisions that are

in the interest of their shareholders.

They're playing the game exactly the way they should be.

And his argument is that the appropriate response

to climate change and these other challenges

must involve policy from democratically accountable

governments.

What do we actually need to do to address

some of these problems, and where does that

incur short-term sacrifice, and how do we

impose those sacrifices in a way that's mandatory and systemic?

Maybe, in the absence of serious government action,

there is a real tension between fiduciary duty and the kind

of action that Climate Action 100+ was calling for.

You should have a reasonable expectation

that wherever you've got your pension money parked,

someone, somewhere is doing the best

possible job they can to make as much money for you as possible.

How would you feel if the asset manager running your pension

plan made certain ESG assumptions

that you don't agree with?

And what happens if those assumptions are wrong,

they're too severe, and that actually costs you

2 per cent to 3 per cent a year on financial performance?

I think climate risk...

the challenge is that it's quite long-term.

So a lot of investment strategies

have a horizon that really doesn't

think about the long term.

If you are a short-term hedge fund,

you're going to own the securities for 24 hours.

You may not care.

But if you are a universal owner that

is going to own that securities for 50 years,

you are going to care immensely about what's going

to happen to that company.

In 30 years' time, we could be through 2 degrees.

We could be past tipping points.

We could be in climate chaos.

Investing to avoid that happening

is the most responsible thing you could do as a fiduciary.

We have one overriding goal with this firm,

and that is to make money.

Climate is a financial risk.

You need to take it into consideration in order

to fulfil your fiduciary duty to your investors.

Another suspect would be Desiree Fixler.

Desiree Fixler was the head of ESG

at DWS, big German asset management company spun out

of Deutsche Bank.

She really exposed the practical problems

that big investment firms have measuring

this investment for good and proving

this investment for good.

There was a tremendous gap between what the company was

saying publicly about their ESG capabilities

to what they were actually doing internally.

You can't mislead your shareholders and investors.

You can't misrepresent.

And you certainly can't mis-sell your products.

Wirecard was placed as a top position in a DWS ESG flagship

fund in 2020.

So at a time when E&Y won't sign off on their financials,

DWS actually upgrades Wirecard on better corporate governance

and cites business ethics.

Marcus Brown, the CEO of Wirecard, has been arrested,

Jan Marsalek is on the run, and the company is insolvent.

There was a statement once made from a CEO:

"You and your American friends are paranoid."

My American friends?

Is he talking about the SEC and the DoJ?

I was a tremendous pain in the ass.

I just didn't stop.

And finally, at my last board meeting,

I pretty much banged on the table

that these are urgent issues.

It was a matter of a few weeks later I got fired.

I knew that greenwashing was absolutely pervasive

in the market.

ESG became a huge marketing tool for other asset managers.

I knew that most of the claims out there were bullshit.

I decided to go public.

I had documents.

I had evidence.

It's really been one of the most impactful whistleblower

allegations.

There was a high-profile raid by authorities

in Germany on a DWS office.

DWS dramatically reduced the quantity of assets

that it's claimed to manage under ESG principles.

I know that I definitely contributed

to killing this ESG party.

One of the biggest problems with ESG

is, how do you measure this stuff?

That's created an opportunity for ratings and index providers,

the biggest of which, in the ESG space, is a company called MSCI.

So an ESG rating is an opinion, how those variables will impact

the financials of that company.

The way that I want to measure it

will almost certainly be different from the way

that you would want to measure it.

We're going to arrive at different opinions.

We're going to arrive at a different rating.

Because we're not just talking about climate stuff.

We're also talking about social stuff and governance stuff.

Different ways of measuring virtue

come up with different results.

It is something that will develop over time.

Clearly, it takes effort to understand

those characteristics.

And it will take even more to price those characteristics

into the value of assets and to the allocation of capital.

I've had many conversations with clients

where they were very confused by some of the rating agencies,

where the same company was rated very highly by one agency

and very poorly by another agency.

Controversy around that industry has led to growing calls

to regulate them, and we're seeing movement around that,

particularly in the EU.

You cannot regulate ratings themselves.

Regulation on ESG has to be more on the ingredients

that you're using to come up with a rating.

If I'm an investor and I look at an opinion by MSCI,

and I look at opinion by others, and then I form my own opinion,

that's a richer world than simply somebody giving it

to you directly.

When you go buy a product in a supermarket

it's going to tell you what the ingredients are,

how much salt they have, how much sugar, how much

fat and other sources.

You're not going to tell people whether they

should eat the sausage.

That is a free choice in a society.

There is a need to scrutinise data.

But in the end, when it comes to opinions rather than data,

diversity of opinion actually enhances the investment process.

It's not really possible to prove whether a company is

completely green.

What if the product that it produces is green,

but that further down the supply chain, the other companies

that it relies on, what if they don't quite

meet the same criteria?

What if they're not quite as virtuous as the ultimate company

that an investor is choosing to invest in?

ESG is an umbrella term, and it means many different things

to different people.

It can be a risk management feature,

how the outside, changing world might affect the company you're

investing in.

It can also mean how the company you're investing in

affects the outside world.

The idea was that you take ES&G factors into consideration when

you look at a stock or a bond or an asset.

But that morphed in people's minds

to thinking that ESG is a measure of a company's goodness.

Does it do the right thing by the environment?

Does it have a nice culture?

Is its governance any good?

And if I buy a company with a good ESG score,

I'm buying a good company.

That is nonsense.

ESG is not about doing good.

It's about being a long-term, sensible investor.

If you're a long-term shareholder

and you care about financial returns,

you need to care about the climate

as well, because the climate effects, for instance,

on inflation is stronger than it's ever been before.

We see it in harvests.

We see it in reinsurance premiums.

You need to care about executive pay

because you want to have a sustainable situation.

You need to care about diversity at board level

because those boards with better diversity

generally perform better.

What does climate have to do with labour laws in a certain

country or diversity and inclusion?

So an alert system morphed into an investment strategy.

Those are two very different concepts.

One is risk management.

The other one is positive impact.

If something has an ESG label on it,

my mum will think it must be full of good companies.

No.

I might go in to a client and show them

a company that they think is bad.

And they'll go: you've got an oil company or an airline

or a cement company in your portfolio.

It's got a low ESG score.

Why is that?

And I'll say, well, it's so cheap

that it takes those risks into consideration,

and we think it's an attractive investment.

I'm using definition one, they are using definition two,

and we don't understand each other.

And that is a fundamental problem that is still around

in the industry.

It was sort of smashing together a bunch of things that are

unrelated so that you can have a very simple,

single indicator of virtue while minimising tracking error

against an index.

And the goal is, ultimately, if you could figure out

how to take your product and make

a few changes such that the return dynamics are the same

or very similar, but you have a slightly greener basket

which might just mean, as we saw,

underweighting fossil fuel players

and then overweighting tech companies.

And what Wall Street played on dressing up risk management

products on well-run companies, investors

were thinking they were investing

in portfolios that were offering environmental and social

benefits.

That wasn't the case at all.

Our final suspect is Stuart Kirk.

Stuart Kirk worked as an FT journalist

and then went on to work as the head of responsible investing

at HSBC Asset Management.

And he was in that role when he came

to give a short speech at an FT Moral Money

conference in London.

Sharon said, we are not going to survive.

And indeed, no one ran from the room.

In fact, most of you barely looked up

from your mobile phones at the prospect of non-survival.

The Sharons and the Mark Carneys of this world

need to tell us why prices are going up with our own demise.

I was in the room when he made that presentation.

It did go down like a cup of cold sick.

He did open up a conversation around the inconsistencies

that are inherent in ESG that wasn't previously there.

So he has to take a share of the blame here, I'm afraid.

And I don't think he imagined that it

would gain quite as much momentum as it did

or lose him his job.

To be suspended straight away is discombobulating.

And I still have not, to this day,

spoken to any of my colleagues.

Horrendously stressful for anyone

who does this for a living, anyone who's got four children,

anyone who's got a sensible job and has

tried to work hard and do the best they can

for their employer, which I've always done.

Now, I've been through a lot of bubbles - dotcom bubbles,

emerging market bubbles.

You could always say stocks were overvalued.

I think this is nonsense.

Here's another viewpoint.

And you would debate it within a firm.

Never in my life have I been in a bubble

where you could not critique it at all

with risk of losing your job.

If my sacrifice was worth anything,

it was allowing people, for the first time,

to voice legitimate and necessary criticisms

of something which needed to be open.

And I know that from the thousands of emails

I got from people saying, I was also

fired for making a mild criticism of ESG.

Over the past 200 or 300 years, global growth,

global development exploded based on a fossil fuel

foundation.

We've now realised that fossil fuels are cooking the planet

and we have to move as rapidly as possible to the post-fossil

fuel age.

That's the future.

Enormous fortunes will be won and lost as part of this.

We need to create new, low-carbon performance

benchmarks, and that requires a complete rethink

by pension fund trustees to reflect this world

that we need to build instead of reflecting the world that we're

trying to exit.

What has gone out of fashion is the term ESG.

And maybe that's a good thing.

This shouldn't be a party.

We are not talking about a party, or not a party.

We are talking about the future of humankind.

A lot of the same financial institutions

that are telling us to rely on ESG

are active behind the scenes, taking advantage of traceless

and often limitless political spending

to influence policymaking.

We will not be speaking of ESG any more 5, 10 years from now.

And that is because sustainability will

be embedded in how we invest.

What I call option one, ESG as an input,

will just melt into the existing investment process and will just

disappear, because everyone will realise we should all be doing

that anyway.

The exciting thing will turn to the goodness scores,

and funds will be properly labelled,

and they will have a big thing on the top saying,

this goodness may affect your returns.

And someone will go, you know what?

I don't mind 4.5 per cent instead of 6 per cent.

And they will choose those funds legitimately

and everyone will be happy.

For anybody to think or say that ESG is dead, that ESG is not

going anywhere, that it was just a label,

that it's just a political philosophy, I'm sorry to say,

they're all wrong.

We think ESG is about as political as gravity.

It's not political.

It's about thinking long term.

And it's about thinking about your returns.

This is the death knell for fossil fuels.

And people holding oil and gas thinking

that this is a long-term growth opportunity,

they're going to get caught short.

The majority of Gen Z and millennials

don't believe in capitalism.

Leaders of that system stand up on a stage and they say:

we know these are big problems.

Climate change is critical.

We have to solve them.

And they talk about ESG and stakeholder capitalism.

And every single year those young kids

who, again, they didn't learn climate change

is real because they watched a documentary years

after they left school.

They learned it like we learn Newton and gravity.

So they know it's real.

They see the leaders of the system say,

it's really important.

We're going to do something about this.

And every single year profits keep going up

and the scientists tell us that we're getting

further and further behind.

There's a significant concern I have

that we'll see political instability as people

try to overthrow the economic system long before we actually

get to 2050 and see if net zero actually plays out.

There is money to be made from the green transition.

It makes perfect sense to put my pension money

and yours into green technologies

that are going to be used all over the world

and that are essential if we're going to get ourselves out

of this climate hole.

What's important is that serious work

is done to really grapple with the challenges

and the opportunities that we face.

And those who do it right will be

surfing the wave of the single biggest economic transformation,

and one of the biggest opportunities

in the whole history of human civilisation.