May 2021
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AAM Magazine
May 2021
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So good it’s bad?

  • Asia
  • Global

It’s a great time to be a sustainability editor – if you’re lazy. Never, even during the dot-com era, have I been bombarded with so many offers of comment from asset managers eager to set out their stalls. If I let the floodgates stand open, I’d have enough copy to last for years.

So why am I worried? Because, amid recurrent warnings that environmental, social and governance (ESG) propositions are already inflating into a bubble, I see anything but sincere conversions to environmental and socially responsible theses in this wave of interest. I do see every sign of an investor fad, driven by financial markets looking for the next trend, and dictated and sized not in proportion to the actual needs and available tools for environmentally and socially beneficial investing, but by the demands of a huge surplus of moribund global capital, constrained by declining traditional returns, and desperate for more yield, of any kind.

Does that matter if the investment fad helps mainstream environmentalism, and embeds ESG concerns and reporting into established financial structures? Well, it matters if it eventually does damage to the thesis, and to environmental priorities. It matters if investors run away from ESG as fast as they stampeded into it, once the bubble bursts. And above all, it matters if it signals no change in the underlying attitudes and practices that are well on their way to destroying us and the planet.

I wish I could believe that all the claims and propositions I’m being served by asset managers hold equal merit. I wish I could believe in the enduring sincerity of their commitment – or conversion – to the underlying cause of environmentalism, and the necessity to target other priorities than the bottom line if we’re to survive. I wish I could believe that asset management, and especially investment product marketing, was a fit school for broad-minded, public-spirited assessment of consequences. And I wish I could believe that the law of diminishing returns didn’t apply in ESG investment. Instead, I’m reduced to biblical mutterings about late repenters.

Behind all the earnests of environmental awareness and public spirit, I’m afraid of plain old opportunistic greed – exactly the same economic behaviour that got us into this mess in the first place. If we’re talking economic behaviour, though, I favour the other economic emotion: fear. Fear in the form of prudential responsibility, and proper awareness and measurements of impacts in every sense strikes me as a very good guide and discipline for investment in the years ahead. The overriding fear of extinction ought to be enough to stop us all becoming victims of our own greed.