Political pressure is hampering progress across environmental, social and governance (ESG) investments, warns deVere Group CEO Nigel Green.
The warning comes after the world’s second largest fund manager, Vanguard, pulled out of the Net Zero Asset Managers initiative, whose members are committed to achieving net zero carbon emissions by 2050.
Green says: “Republicans in the US appear to be stepping up their attacks on financial institutions that they say are hostile to fossil fuels. There can be no doubt that Republican states like Texas, Florida, Louisiana and South Carolina have ESG investing 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 investing to their clients.”
Green says investors should focus on the “fundamentals” which includes understanding a company’s impact on the environment and on society and the impact that has on long-term returns to investors.
Green says: “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. 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.”
Green says that while scrutiny is welcome, financial companies must not bow to political pressure regarding their own commitments or by reducing their ESG offerings to clients.
He calls for “unprecedented levels of cooperation” between financial advisories, insurance firms, banks, wealth and asset managers, investment companies, fintech groups, banks and auditors to mobilise the level of personal finance needed.
Green adds: “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.”
