In Focus: When Clients' Plans Change  

Oh no! Not another ESG article

Oh no! Not another ESG article
Photo by Markus Spiske from Pexels

“Oh no, it’s another sustainability article. What are they saying now?"

“This expert says one thing, while another says he’s wrong."

"This new solution is launched, and immediately someone says it has been green-washed. This ESG fund was performing well last year, but this year it is not. This research company says the other is no good.”

“There was a climate agreement in Scotland, which sounds like a good thing, but my kids say that it was a bad thing. What if I recommend a ‘sustainable’ solution and it turns out not to be?”

It is no wonder that so many people in our industry appear to have taken the decision to simply wait until there is regulation and ‘they’ have sorted it all out.

All of us suffer from the psychological tendency to not act when there is too much choice or information.

What’s particularly interesting to me is why there is suddenly so much interest and information, and so many experts and opinions. I am not an expert. I rely on my team at Dynamic Planner for that.

But I knew about global warming as a student, when there were rallies and campaigns. Ironically, these tended to be overshadowed at the time by protests against coal mines closing and the dangers of nuclear power. Some people went to all of them – students love a march and a placard. 

In fact, global warming was discovered in 1861. A consensus that it was fact was reached when I was in school.

Shockingly, the ‘inconvenient truth’ voiced by an American vice-president was all the way back in 2006, 15 years ago. So what has changed? Why the sudden momentum shift?

Could it be magic?

Well, I think it’s something magical, so much so that, if they had made a film about it in the 1980s, this would be the surprise happy ending: namely, that all those students and others that stood and campaigned for action on global warming for decades have, over just a few short years, seen the free market and capitalist machine walk across the road and stand by their side.

Evidently far more powerful than a vice-president, the capitalist free market economy is an instant democracy.

Through the mechanisms of the asset management industry, it takes your clients’ investment preferences and your investment recommendations and aggregates that up into a voting block that every board member and decision-maker fears.

The UK is the sixth largest economy and the second largest asset management industry in the world, and of course most providers are global. 

When viewed on that scale, it therefore doesn’t matter if occasionally an ESG score is incorrect, somebody gamed the system, or it turns out your opinion was wrong and the other person was right.