ESG is BS
WE NEED CLIMATE IMPACT
by Duncan Grierson, CEO of Clim8 InvestESG is a huge distraction in the fight
against climate change. Investors need
a new category that does what it says
on the tin – Climate Impact.
In the past few years, a tsunami of money,
trillions of dollars have moved into so-called
ESG investment funds. Yet despite supposedly
screening for environmental, social and
governance issues, it is shocking that the
world’s 20 largest ESG funds hold on average 17
fossil fuel companies in each of their portfolios.
And it’s not just fossil fuels – they also hold
tobacco, weapons and alcohol^1.
Many ESG funds also have Big Tech in their
top five holdings. Investing into Facebook is
not making any difference on climate change.
Google’s parent company Alphabet is the
most common stock in the top 20 ESG funds^2.
Although Google has made much effort to
green the energy usage of its data centres, their
core product is not making a positive impact on
climate change.
It’s a depressing fact that ESG is used as a
marketing trick to capture more investment
dollars. Asset managers have taken advantage
of the hazy, unregulated definition of ESG to
facilitate greenwashing on an epic scale^3. This
has made the investment industry complicit in
slowing down the systemic changes the world
needs to reverse climate change. Although the
‘good’ companies within ESG funds are working
to reduce their negative externalities, this is not
enough if we want our children to have a truly
sustainable planet to live on.
Regulators are beginning to wake up to ESG’s
inherent problems. The UK’s Financial Conduct
Authority warned fund managers earlier
this year that their “poor quality” ESG fund
applications may impact consumers and must
improve^4. The European Union is working on
a taxonomy governing what can be marketed
as ESG^5 and the Securities and Exchange
Commission in the USA has formed an ESG
task force^6.These are all welcome developments. But even
with better regulation, it’s unlikely that every
ESG fund is going to switch its portfolio to truly
impactful investing overnight. The reality is
that ESG is a distraction f rom the investment
needed to live sustainably on our planet.
Creating the change we need means moving
away f rom ESG and forming a new investment
category – Climate Impact.By stopping the greenwashing and investing
only in companies that are leading the way in
areas like clean energy, electric mobility and
sustainable food, we can target our investments
for the greatest possible good. Nothing less
will do. De-carbonising our way of life, f rom the
food we eat, to the clothes we wear, to how we
get f rom A to B, will need investment of trillions
of dollars across every sector. And the change
needs to happen now.So let’s stop the pretence that ESG will make
a difference with slightly greener funds and
seize the moment to create something better.
Climate change is a cancer that is attacking our
world. ESG is a paracetamol that numbs and
distracts us f rom solving the biggest problem
the world has ever faced.Let’s embrace a new category that climate-
conscious investors can get behind: The time
is now for Climate Impact.1 The Economist | 2 MSCI | 3 U.S. Securities and Exchange Commission | 4 Financial Conduct Authority | 5 European Commission | 6 U.S. Securities and
Exchange Commission | Views expressed in this article are those of the author and may be subject to change. Clim8 Invest is the registered trademark of
Clim8 Invest Ltd. Registered in England and Wales, company no. 12179517. Registered office: 1 Lyric Square, London, W6 0NB. Clim8 Invest Ltd (FCA reg no.
927293) is an appointed representative of WealthKernel Limited (FCA reg no. 723719), which is authorised and regulated by the Financial Conduct Authority.
clim8.com With investing, your capital is at riskADVERTISEMENT