ESG investment is failing, and marketers are to blame. That seems to be the developing narrative as the debate around what ESG should mean and how it needs to evolve gains more attention.
There’s been a noticeable shift in the public debate around ESG over the last few months. After years of there being an unspoken consensus that conversations about ESG investment should be presented as a one size-fits-all solution, there is now clamour for a diversity of opinion, some of which pushes hard against the accepted party line.
Contrarians at the gate
One of the most high-profile commentators has been Stuart Kirk, HSBC’s former Global Head of Responsible Investing, who in a now infamous speech made a number of contrarian claims, including that climate change is “not a financial risk that we need to worry about." While I don’t agree with his stance that it doesn’t matter if Miami is underwater, he’s right to say that when it comes to combating climate change “humanity's best chance of success is open and honest debate.”
The need to rethink the discussion and presentation of ESG investing is something that has emerged quite strongly since the Covid-19 pandemic. And Kirk is not the only high-profile ESG investment professional to quit citing the lack of honesty around the marketing of ESG investment products.
Last year BlackRock’s ex-Chief Investment Officer of Sustainable Investing, Tariq Fancy, penned an op-ed where he claimed Wall Street was greenwashing the financial system and that “sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community.”
It’s perhaps no surprise that some of the most vocal critics of the current discourse around ESG investing are the people charged with leading this push. More than others in their organisations, they are aware of the challenges of implementing credible ESG strategies and how much investment claims can stand up to scrutiny.
Certainly, from where I sit in Asia, I am hearing more requests from financial executives that the discussion of ESG and sustainability needs to take into account the situation on the ground, such as the fact this region is likely to be dependent on coal for some time and that ESG will have different interpretations in different markets.
Pointing the finger
While I agree there needs to be a more nuanced conversation around ESG - and space is now opening up to have this - I don't agree with the line that seems to be emerging, which is that marketers are to blame.
It’s hard to find a story in the business press about the changes needed in ESG investing without an executive blaming marketers. Phrases like taking over and hijacking are used to suggest this has happened without the support of stakeholders or as if there was some sort of coup by the marketing department.
However, it fails to take into account that marketers are often having to deliver on a strategy that has been decided without their input. And until the 'business' is willing to talk about ESG in a more balanced and precise way, the marketing strategy has to reflect the prevailing company view. Marketers aren't passive but they are not always empowered.
And as the cases of Kirk and Fancy show, there is also often a division between frontline executives who deal directly with client frustrations over the communication around ESG, and the C-suite, which ultimately sets the strategy. If senior executives, whose role it is to determine the ESG investment strategy, aren’t able to affect how their organisations promote and deliver ESG strategies, do they really believe marketers can?
As Kirk says, there needs to be an honest debate if the world is to effectively tackle the problem of climate change. But, as the conversation develops, the discourse needs to recognise that any failure is a collective one, and blaming marketers only leaves us farther away from finding a solution.
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