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April 2024
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AAM Magazine
April 2024
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Bridges to reality?

  • Asia
  • Global

If spoken agreement could accomplish anything in itself, the Building Bridges summit held in October in Geneva would have been a triumph. The financial community appears united with the policy and scientific community in accepting the reality of sustainability crises and climate change, and accepting the need to refine their calculations of risk-adjusted returns accordingly. The only questions are how fast to adopt these considerations, and where to get the reliable data about them. 

It’s not just the couple of thousands of delegates at the summit either. According to a new report from Cerulli Associates on US environmental, social and governance investing, none of the asset managers in its poll intends to stop incorporating ESG considerations into their investment decisions, or to stop offering ESG and impact funds to clients. As for institutions, only 7% will not incorporate ESG into investment decisions. That’s exactly how much headway the anti-ESG backlash has made among the financial community in the US, despite that market’s partisan divisions and extensive anti-ESG publicity. 

Yet some 30% in the Cerulli poll also said that they would be more careful in communicating their ESG positions through websites, marketing materials, prospectuses, and other formal investment documents, while around 57% expect to create communications materials to explain ESG positions better.

This illustrates how unreal the whole debate has become. Investors with serious responsibility for actual money are not just persuaded of, but acting in accordance with, sustainability considerations. But they are also going along with a fantastical charade of indulging politically motivated lies. After all, fiduciaries are obligated to obey reality, and if this makes them act opposite to politicians, then you know what to call what politicians are doing. And if politicians can get the message about how little effect the anti-ESG crusade has had on opinion, perhaps they’ll give it up as well.

Meanwhile, many of the financial professionals at the Building Bridges summit, while committed as businesses to sustainability, reiterated that it was up to politicians to legislate sustainability considerations, and that their specific duty was to their clients. 

Yes, that’s what narrowly understood fiduciary duty dictates. However, discussions at the summit also contested both the narrower definitions of these obligations, and the freedom of institutions to act outside them. Above all, respecting and accepting the decisions of democratically elected governments is one thing – although the lobby group cacophony surrounding recent decisions by the Biden administration to regulate private funds puts some question marks against that level of respect – but a partisan opportunistic party position does not represent the will of the people, and business communities have no obligation to treat it as such. Inevitably they’re going to contribute to policy and political debates. They might as well do so when it most matters.