'ESG: how we spend our money is more useful than where we invest it'

Personally, I have always been sceptical about ESG funds and the actual impact the vast majority have. 

I’m not sure Shell or BP are greatly concerned if a fund manager decides not to hold their shares or how that influences their day-to-day business operations and decisions.

After all, they are already huge investors in ‘green’ technology. They have to be, they know oil is a finite resource, if they don’t diversify into alternative energy sources their business ceases to exist. 

I have long said there is a huge issue with directly asking the majority of clients if they would want to invest in 'ESG-focused' funds because they will generally say yes, even if they don’t really care.

After all, who wants to look like the one who hates the planet? Some will turn once you tell them it might lead to lower returns or higher investment costs though.

That is why fund managers can get away with greenwashing; clients do not actually care, they can go home with a rosy glow thinking they have done their bit, even boast to their middle-class friends they have 'green' investments.

Meanwhile, they drive the Range Rover to fly off long haul to a 5-star resort in a country now dependent on tourism for its economy. 

We would all have a far greater impact if we thought more about how we all spend our money, and who with, than where we invest it. 

Clients generally do not look under the bonnet to see what ESG means or how their funds really are invested. There is the famous example of the ESG fund that held Heathrow airport bonds issued to fund Terminal 5, justified by the fact it had a net-zero target in 2040. 

In large part the drive to ESG, including all those lovely surveys saying our clients are clamouring for ESG investments, are driven by desperate fund managers increasingly trying to look relevant and justify fees.

Look who paid for all those market surveys, could it be the fund managers who have a range of ESG funds to foist on us? Perhaps like the one large provider who overnight declared that all their funds were ESG without actually changing anything? 

In market research, if you ask the wrong questions, you get the right answers. 

If you leave it to those who naturally ask for ESG investments, and that invariably means environmentally conscious only, not the other aspects of 'ESG', then the numbers are in single figures in terms of percentage of clients. At least that is my personal experience.

Cynical, moi?

I think we would all have a far greater impact if we thought more about how we all spend our money, and who with, than where we invest it. That will really drive change when we influence turnover and profit for those businesses not doing the right thing by stopping using them.

If we all do that then holding ESG investments makes sense, the good companies will prosper, and so will their share price, and the bad ones will suffer. Then, they either change, if they can, or die.

Much like the planet will if we do not take this more seriously than feeling good about having an ESG pension. 

Darren Cooke is a chartered financial planner at Red Circle Financial Planning