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:
- The Trillion Dollar Fantasy: Linking ESG Investing with Planetary Impact and
- Heroic Accounting
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
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
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.
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.
Managers of ESG investments create false hope, exaggerate outperformance, and contribute to the delay of long-past-due regulatory action.
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 
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