Writer, Investor, Advisory Director, Berkshire Partners – Professor of Practice, Fletcher School Tufts University
The beleaguered environmental, social, and governance (ESG) investment sector has taken a pummeling from all sides this year, most recently from a Republican-led offensive accusing $8 trillion asset manager BlackRock and other investment companies of hostility toward the oil and gas sector.
https://fortune.com/2022/12/19/esg-investing-faces-challenges-from-all-sides-can-it-survive/
There is a strong appetite in the investment community right now for sustainable funds to invest in but does that investment lead to sustainable outcomes, and also important – is it a sound investment?
I read a couple of fascinating articles recently by Ken Pucker which addresses these questions so I invited him to come on the podcast to talk this through. Ken is the former COO of Timberland, is an Advisory Director at Berkshire Partners, and is a Senior Lecturer at the Fletcher School at Tufts University.
The two articles of Ken’s that I read were:
You should check them out.
This was a truly fascinating episode of the podcast and as always, I learned loads, I hope you do too.
https://www.audible.com/pd/Is-ESG-Investing-Impactful-And-Or-Profitable-A-Chat-With-Ken-Pucker-Podcast/B09GRGKBB2
The following is a conversation with Ken Pucker.
Ken is an Advisory Director to Berkshire Partners, and currently teaches Sustainability at the Boston University Questrom School of Business. In addition to this, and among many other things as well, Ken also formally served as Chief Operating Officer of Timberland.
This conversation is broken down into two distinctly defined chapters. The first being ESG and the second, Ken’s viral article on the myth of sustainable fashion.
By: Ken Pucker & Andrew King
Harvard Business Review
Most people assume that ESG Investing is designed to reward companies that are helping the planet. In fact, ESG ratings which underlie ESG fund selection are based on “single materiality” — the impact of the changing world on a company P&L, not the reverse. Asset management firms have been happy to let the confusion go uncorrected — ESG funds are highly popular and come with higher management fees. The danger with ESG investing is that it might convince policy makers that the market can solve major societal challenges such as climate change — when in fact only government intervention can help the planet avoid a climate catastrophe
Read the full article: https://hbr.org/2022/08/esg-investing-isnt-designed-to-save-the-planet
Thank you to the Economist for interviewing me for this piece. It is spot on. Speaking of ESG investing, the article notes “it has a negligible impact on carbon emissions, especially by the highest polluters. Its attempt to address social issues such as workplace diversity is hard to measure. As for governance, the ESG industry does a lousy job of holding itself to account, let alone the companies it is supposed to be stewarding. It makes outsized claims to investors. It just unmanageable demands on companies.” Not a great report card.
All that said, diligence on non financial factors is a must for any sane 21C investor. To abet, reporting should be standardized and audited. Even so, it is unreasonable to expect that ESG investing will do much to advance planetary welfare.
The environmental, social and governance (ESG) approach to investment is broken. It needs to be streamlined and stripped of sanctimoniousness, argues Henry Tricks
Read full article:
https://www.economist.com/special-report/2022/07/21/a-broken-system-needs-urgent-repairs
Harvard Business Review, May – June 2021
For two decades progressive thinkers have argued that a more sustainable form of capitalism would arise if companies regularly measured and reported on their environmental, social, and governance (ESG) performance. But although such reporting has become widespread, and some firms are deriving benefits from it, environmental damage and social inequality are still growing.
This article, by Timberland’s former COO, outlines the problems with both sustainability reporting and sustainable investing. The author discusses nonstandard metrics, insufficient auditing, unreliable ESG ratings, and more. But real progress, he says, requires not just better measurement and reporting practices but also changes in regulations, investment incentives, and mindsets.
Read the full article: https://hbr.org/2021/05/overselling-sustainability-reporting
Institutional Investor
By Andrew A. King and Kenneth P. Pucker
February 25, 2022
Managers of ESG investments create false hope, exaggerate outperformance, and contribute to the delay of long-past-due regulatory action.
In late 2018, while seated on the dais of The New York TimesDealBook Conference, BlackRock CEO Larry Fink declared that“demand for ESG [environmental, social, and governance] is going to transform all investing.” At the time, Fink’s assertion seemed bold. Today it looks prescient. Escalating social and environmental challenges and claims that ESG investing can deliver alpha (outsize market returns) and a more sustainable planet have prompted investors to divert more than $3 billion per day to ESG investment products. According to Bloomberg, ESG investment now represents approximately one third of all professionally managed assets.
Read the full article:
https://www.institutionalinvestor.com/article/b1wxqznltqnyzj/ESG-and-Alpha-Sales-or-Substance
Institutional Investor
On April 8, the National Oceanic and Atmospheric Administration observatory in Mauna Loa, Hawaii, reported that the carbon dioxide levels in the atmosphere had reached 419 parts per million, the highest levels recorded in more than 4 million years. That same day, BlackRock, the world’s largest asset manager, announced another milestone: It had raised $1.25 billion for its U.S. Carbon Transition Readiness ETF, the largest exchange-traded fund in history. The fund is a visceral embodiment of BlackRock CEO Larry Fink’s assertion to clients that the firm “doesn’t see itself as a passive observer” when it comes to combating climate change.
By Kenneth P. Pucker •. September 13, 2021
Read full article: https://www.institutionalinvestor.com/article/b1tkr826880fy2/The-Trillion-Dollar-Fantasy
Institutional Investor
Alongside Bono, Richard Branson, and eBay founder Pierre Omidyar, private equity firm TPG launched the Rise Impact fund in 2016. The offering committed “to deliver positive and sustainable impact” while creating a “top-performing fund.” At the time, Bono remarked that “capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model.” Bain Capital followed suit, launching its own Double Impact fund, and KKR recently closed a $1.3 billion impact fund.
Private Equity Makes ESG Promises: Their Impact is Often Superficial