Who killed the ESG party?
Summary
TLDRThe video script discusses the evolution and current state of ESG (Environmental, Social, Governance) investing. It highlights the shift from hype to disillusionment, with factors like the Ukraine invasion and political backlash affecting ESG's image. Despite challenges, ESG is seen as integral to long-term investment strategies, focusing on climate risk and sustainable practices as essential for financial success. The script suggests ESG will become a standard part of investment processes rather than a separate category.
Takeaways
- 🌍 ESG stands for Environmental, Social, and Governance and is a framework for investing that considers these factors alongside financial ones.
- 📈 The term ESG gained popularity after the 2015 Paris Agreements, aiming to keep global warming below 2°C.
- 🔍 ESG investing aims to support companies that are beneficial to the environment, society, and have good governance practices.
- 📉 The hype around ESG has peaked and declined, with some suggesting it may disappear as a term but continue in practice.
- 💡 ESG investing is seen as a response to climate change and other global challenges, aiming for a more sustainable future.
- 🛑 The invasion of Ukraine by Russia has shifted focus towards energy security, affecting the performance of ESG strategies.
- 🗳️ Political backlash, especially in the US, has contributed to a decline in ESG discussions and support.
- 💼 Some asset managers and financial institutions have become quieter about ESG due to political and public pressure.
- 📊 ESG ratings can vary significantly between different agencies, leading to confusion and calls for regulation.
- 🚫 Criticisms of ESG include concerns about 'greenwashing', where companies misrepresent their sustainability efforts.
- 🌱 Despite the backlash, proponents argue that ESG investing is essential for long-term financial and environmental sustainability.
Q & A
What does ESG stand for and what is its purpose?
-ESG stands for Environmental, Social, and Governance. Its purpose is to invest in companies in a way that helps the environment, advances social aims, and encourages proper corporate governance.
Why did the term ESG become trendy after the Paris Agreements in 2015?
-The Paris Agreements aimed to keep global warming well below 2°C above pre-industrial levels, prompting a realization that the private sector needed to play a part in combating climate change, hence the rise in ESG's popularity.
What is the role of the Norwegian Sovereign Wealth Fund in ESG investing?
-The Norwegian Sovereign Wealth Fund, led by Nicolai Tangen, manages $1.6 trillion and owns about 1.5% of all listed equities worldwide. It considers ESG factors seriously, viewing climate as a financial risk and integrating ESG into its investment strategies.
What was the peak of the ESG excitement, and what event marked this?
-The peak of ESG excitement was in 2021 during the COP26 climate conference in Glasgow, where the Glasgow Financial Alliance for Net Zero was announced with support from major financial institutions.
How did Russia's invasion of Ukraine impact the ESG movement?
-The invasion led to higher hydrocarbon prices and a focus on energy security, causing a shift away from climate considerations. It also resulted in underperformance of ESG-driven strategies compared to the wider market, which was boosted by oil and gas.
What role did Tucker Carlson play in the backlash against ESG?
-Tucker Carlson led a political backlash against ESG, accusing it of causing energy rationing and farmer revolts. His influence contributed to a cultural war narrative that pressured financial institutions to quieten their ESG promotion.
What was the impact of Larry Fink and BlackRock on the ESG movement?
-Larry Fink, CEO of BlackRock, was a prominent advocate for ESG, promoting the idea of using capitalism to address its shortcomings. However, political and media attacks led BlackRock to become less vocal about ESG, with Fink even stating a preference for not using the term.
Why did the asset management industry initially embrace ESG?
-The asset management industry saw ESG as an opportunity for growth, with strong inflows into ESG funds. However, the industry also faced criticism for potentially misrepresenting ESG investments and greenwashing.
What is the controversy surrounding ESG ratings and how they are measured?
-ESG ratings are subjective opinions on how environmental, social, and governance factors will impact a company's financials. There is controversy due to the lack of standardization, with different agencies producing varying ratings for the same company.
What does the future of ESG look like according to the script?
-The future of ESG is expected to see sustainability embedded in the investment process, with the term ESG possibly disappearing as it becomes a standard part of doing business. The focus will shift to genuine impact over marketing and labels.
How does the script suggest the ESG movement should evolve to be more effective?
-The script suggests that ESG should move beyond hype and focus on real solutions, integrating ESG considerations into standard investment practices, and ensuring that actions align with long-term financial and environmental goals.
Outlines
🌐 ESG: The Changing Landscape of Investment
The paragraph discusses the evolution and current state of ESG (Environmental, Social, and Governance) investing. It highlights how ESG has shifted from being a mere marketing trend to a significant factor in how people invest their money. The focus is on investing in a manner that benefits the environment, advances social goals, and promotes good corporate governance. The narrative also touches upon the hype cycle of ESG, suggesting that while it may have peaked, it's now moving towards a more mature phase where the focus is on real solutions rather than mere marketing. The importance of ESG is underscored by the Norwegian Sovereign Wealth Fund CEO, who views climate change as a financial risk and emphasizes the need for long-term investment strategies that consider ESG factors.
📉 The ESG Hype and Its Decline
This section delves into the peak and subsequent decline of the ESG hype cycle. It points out that the excitement around ESG reached its zenith in 2021 during the COP26 climate conference in Glasgow. However, the paragraph suggests that the enthusiasm has waned by 2024, with ESG becoming less of a conversation topic. The narrative identifies several factors contributing to this decline, including the invasion of Ukraine by Russia, which redirected focus towards energy security over climate concerns, and a broader political and cultural backlash against ESG, particularly in the United States. The paragraph also discusses the role of high-profile figures like Tucker Carlson in fueling this backlash and the subsequent quieting of ESG promotion by financial institutions.
🛑 The Critique and Realignment of ESG
The paragraph examines the criticism and reevaluation of ESG practices within the asset management industry. It mentions the significant inflows into ESG funds and the subsequent decline, particularly in the US, suggesting a shift in market sentiment. The narrative also explores the role of asset managers in promoting ESG and the pressures they face from political and public opinion. The paragraph highlights the concerns about the effectiveness of ESG strategies and the potential misalignment of interests between asset managers and their clients, especially in light of the need for immediate financial returns versus long-term sustainability goals.
💼 The Internal Conflicts and External Criticisms of ESG
This section focuses on the internal conflicts within companies regarding ESG practices and the external criticisms they face. It discusses how ESG has been used as a marketing tool and the challenges of measuring and proving the effectiveness of ESG investments. The paragraph also highlights the case of DWS and the whistleblowing by Desiree Fixler, which exposed discrepancies between public claims and internal practices regarding ESG. The narrative underscores the need for transparency, accurate measurement, and the integration of ESG considerations into investment strategies without greenwashing.
🌱 The Future of ESG and Sustainability
The paragraph discusses the future of ESG and sustainability in investment practices. It suggests that the term 'ESG' may fall out of fashion, but the principles of sustainability will become integral to how investments are made. The narrative touches on the need for new performance benchmarks and the role of pension fund trustees in reflecting the world we are moving towards. It also addresses the potential for political instability due to a perceived lack of action on climate change and the importance of serious work to address the challenges and opportunities of the green transition.
🌿 The Transformational Power of ESG
In this final section, the paragraph emphasizes the transformative potential of ESG and the economic opportunities it presents. It suggests that while the term ESG may no longer be used in the future, its principles will be embedded in all aspects of investing. The narrative highlights the importance of long-term thinking and the integration of ESG considerations into investment strategies for sustainable returns. It also discusses the role of younger generations in driving the demand for sustainable investing and the potential for significant economic shifts as the world moves towards a greener future.
Mindmap
Keywords
💡ESG
💡Greenwashing
💡Sovereign Wealth Fund
💡Paris Agreements
💡Net Zero
💡Fossil Fuels
💡Asset Management
💡Whistleblower
💡MSCI
💡Climate Change
💡Fiduciary Duty
Highlights
ESG is a multi-trillion dollar marketing scheme that has evolved into the future of humankind.
ESG stands for Environmental, Social, and Governance, focusing on investing in a way that benefits the environment, society, and proper corporate governance.
The term ESG became trendy after the Paris Agreements in 2015, aiming to keep global warming well below 2°C.
Nicola Tangen, CEO of the Norwegian Sovereign Wealth Fund, emphasizes the importance of ESG in managing climate as a financial risk.
The excitement around ESG peaked in 2021 at COP26, with the Glasgow Financial Alliance for Net Zero gaining support from major financial institutions.
There is a significant difference between declaring support for ESG and actually implementing it.
The ESG hype cycle is considered over, with a shift towards disillusionment and a more realistic approach to ESG practices.
Vladimir Putin's invasion of Ukraine has been a turning point for ESG, shifting focus from climate to energy security.
Tucker Carlson has been influential in leading a US political backlash against ESG, contributing to its decline in popularity.
Asset managers like BlackRock and JP Morgan Asset Management have been under pressure to reduce their focus on ESG.
Larry Fink, CEO of BlackRock, has become a central figure in the ESG narrative, advocating for the integration of ESG into capitalism.
The rise of ESG saw significant inflows into ESG funds, but recent trends show a decline in the US, with nearly $9 billion pulled out.
There is a growing call for regulation in the ESG ratings industry due to inconsistencies and confusion among investors.
ESG ratings are subjective opinions, leading to different interpretations and results, which can create confusion for investors.
Desiree Fixler, a whistleblower from DWS, exposed the gap between public ESG claims and actual practices within investment firms.
ESG is not about doing good but about being a long-term, sensible investor, focusing on financial returns and risks.
The future of ESG may involve it becoming an embedded part of the investment process rather than a separate label.
The term ESG might fall out of fashion, but the principles of sustainability and long-term thinking will persist in investing.
There is a significant generational shift in attitudes towards capitalism and ESG, with younger generations demanding action on climate change.
The green transition presents economic opportunities, and investing in green technologies is seen as a prudent move for the future.
Transcripts
everywhere now 2024 tumble weed 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
[Music]
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 and 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° above
pre-industrial levels there was quickly
realization that the private sector
would have to play its part in
that I'm Nicola tangan and uh I'm the
CEO of the Norwegian Sovereign wealth
fund we run $ 1.6 trillion dollar and we
own roughly one and a half% 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
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 201s 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 tumble weed it does not come up in
conversation at all
[Music]
the excitement around ESG reached its
peak in 2021 at the cop 26 climate
conference in Glasgow in the UK there
was a big announcement that glasgo
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 supports 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 industri is having
produced some good things that we need
to keep some bad things we don't ESG is
here to say but it's not going to be a
linear Journey the question is who
killed the ESG party there's a number of
suspects
[Music]
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 cost 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 boyed by oil and
gas dogs 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 and G as soon as the world got
scarier add a bit of Co 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 do 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 this the last Hara when will
it finally make me more money than my
Tekken Ms and get 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 move to this new
system wind and solar if you can capture
it and store it and you can make it a
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 taker Carlson he
was instrumental in leading this us
political backlash against 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 Ronda santis 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 G
fans there's been another initiative
also very important called climate
action 100 plus 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 Black Rock JP Morgan Asset
Management Pimco Invesco State streets
at this point they got worried it might
not be in the interests of of their
clients of their investors for these
asset managers to be telling all these
companies to reduce their emissions
blackr which is by far the biggest asset
management company in the world became a
central part of this story partly due to
to the role played by his chief
executive Larry thinkink 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 Black
Rock and Larry think in particular
became really Central targets for those
political and media attacks especially
from the right black crck has certainly
become less vocal around ESG in fact
Larry think now says that he prefers not
to to use that 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 was there a
lot of um 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 uh 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 compies every year we
would discuss governance and of course
also climate we vote at uh roughly
12,000 agms every year on 12,000
proposals even though we only uh account
for 1 and a half% of all the votes in
the world we also see that we have
roughly an additional three 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 Focus funds in Europe to
the tune of something like 11 billion
whereas in the US it was the single
worst quarter that morning star has
recorded nearly 9 billion dollars came
out of sustainability funds es andg or
three letters that do not leave your
mouth if you are on marketing trips
across various States in in the US if
you're an asset management firm do I
think the big asset managers uh 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 tar fany 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 right it's a neoliberal the free
market will figure this out cuz 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 you know it's not a good
idea to have a supply chain issue with
you know with with slave labor 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
impune 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 to climate change and these
other challenges must involve policy
from Democrat atically accountable
government 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 plus 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 to 3% a year on
financial performance I think climate
risk the challenge is that it's it's
quite long term so a lot of investment
strategies have a horizon that really
doesn't think about you know about the
long term if you are a short term hge
fund you're going to own the Securities
for you know 24 hours you may not care
but if you are a universal owner that
are 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 two 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 fulfill your
fiduciary duty to your investors another
suspect would be Desiree
fixler desire fixler was the head of ESG
at d WS 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
missell your
products wire card was placed as a top
position in a DWS ESG Flagship Fund in
2020 so at a time when eny won't sign
off on their financials DWS actually
upgrades wire card on better corporate
governance and sites business ethics
Marcus Brown the CEO of wireart has been
arrested Yan maralik is on the run and
the company's insolvent there was a
statement once made that uh from the CEO
you and your American friends are
paranoid my American friends like you
talking about this SEC and the
doj I was a tremendous pain in the ass I
just didn't stop and finally um at my
last board meeting I pretty much like
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 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 claims to manage under
ESG principles I know that I definitely
contributed to 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 to measure we're going
to arrive at different opinions we're
going to arrive at a different rating
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 and we're
seeing movements around that
particularly in the EU you cannot
regulate ratings themselves regulation
uh on
ESG has to uh be more on 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 Ms 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 how much salt they have
how much sugar how much you know fat and
other other other sources you're not
going to tell people whether they should
eat a sausage that is a free choice in a
society there is a need to
scrutinize 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 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
effect for instance on inflation is
stronger than it's ever been before we
see it in in harvests we see it in
reinsurance um premiums you need to care
about uh executive pay because you want
to have a sustainable uh 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 like labor
laws in a certain country you know 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 mom
will think it must be full of good
companies no I might go into 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 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 minimizing tracking error you know
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 right
which might just mean as we saw you know
underweighting fossil fuel players and
then overweighting tech companies and
what Wall Street played on dressing up
riskmanagement products on weal 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 F 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 nons survival the Sharons
and the maranes 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 in
inconsistencies that are inherent in ESG
that 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 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 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 um 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 two or 300 years
Global growth Global development
exploded based on a fossil fuel
Foundation we've now realized 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 one 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're
not talking about a party or not a party
we are talking about the future of a
human kind a lot of the same financial
institutions that are telling us to rely
on ESG are active behind the scenes
means taking advantage of you know
traceless and and often Limitless
political spending to influence
policymaking we will not be speaking out
ESG anymore 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 realize we should all be
doing that anyway
the exciting thing will turn to the the
goodness scores and funds will be
properly labeled 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 and a half% instead of six and
they will choose those funds
legitimately and everyone will be happy
for anybody to think or say that ESG is
dead that isg is not going anywhere that
it was just a label that is 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 now for fossil
fuels and people holding oil and gas
thinking that they this is a long-term
growth opportunity they're going to be
get caught
short the majority of j 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 you know climate
change is real because they watch a
documentary years after they left school
they learned it like we learned Newton
and gravity right so they know it's real
they see the leaders of the system say
that oh 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 right 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 way of the single biggest
economic transformation and one of the
biggest opportunities in the whole
history of human civilization
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