ESG investment is threatened by political pressure in America that could derail efforts to tackle climate change, warns the ceo of one of the world’s largest financial organisations.
The warning from deVere Group’s Nigel Green comes as it is revealed that the world’s second-largest global asset manager is resigning from the Net Zero Asset Managers initiative, whose members are committed to achieving net zero carbon emissions by 2050.
“Republicans in the U.S. appear to be stepping up their attacks on financial institutions that they say are hostile to fossil fuels,” said deVere Group ceo Nigel Green. “There can be no doubt that Republican states like Texas, Florida, Louisiana and South Carolina have ESG investment in their sights.
“Florida governor, Ron DeSantis is helping to lead the charge, supporting a recent resolution by the Florida State Board of Administration claiming the state would not back ‘ideological’ investing. In Louisiana, the state treasurer has confirmed it’s pulling $800 million from funds that some have deemed to be pushing a more ‘woke’ agenda.
“Against this background, it can be reasonably assumed that heightening political pressure is responsible for a growing number of financial firms stepping away from their own commitments and from offering ESG investment to their clients.
“The ESG backlash is here. But it is misguided. We need to get back to the fundamentals. A failure to know a company’s impact on the environment and on society is a failure to understand the impact on long-term returns to investors. ESG frameworks give intelligence about where the key shifts and trends are taking place now and in the future, and how disruptive they could turn out to be.
“This then fuels business, development and innovation activities which are likely to present major opportunities for investors because it provides intelligence on factors which will cause changes in markets.”
Companies that take their ESG obligations seriously are the ones that demonstrably outperform – and this, therefore, is clearly beneficial for clients of financial institutions.
“It’s clear that companies with strong ESG credentials compete better with their peers in terms of related technology, innovation and regulation. In addition, they are more successful at recruiting and retaining top talent,” added Green.
While scrutiny is welcome, financial companies must not “bow to political pressure” regarding their own commitments, or by reducing their ESG offerings to clients.
During the recent COP27 summit, Green noted: “The world of international finance needs to step up – and now. There needs to be unprecedented levels of cooperation between financial advisories, insurance firms, banks, wealth and asset managers, investment companies, fintech groups, banks and auditors, amongst others, to help unlock and mobilise the trillions of dollars of private finance that is urgently required. Without this cooperation, the level of finance will not be available, nor at the pace necessary, to halt the worst effects of human-created global warming.”
“It’s regrettable that some within the global finance community appear to be stepping away from their roles in addressing the climate crisis. I suspect they are positioning themselves on the wrong side of history.”
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.