ESG’s Alphabet Soup Needs Fixing To Avoid Greenwashing, Misselling

When we started out and I was at an insurer, they had a big team of scientists looking at climate change. It is because we were looking at increased claims from flooding and physical disasters. They wanted to understand the long-term impact of that. So there was expertise but it wasn’t classed as ESG.

At the end of my time there, they said okay Allianz and AXA have come out with really ambitious statements around their pathways to net zero. We need to do something better. On one hand, that is quite good. But did they actually understand what they were committing to? We signed up to that. But how to implement it, is a different matter. It is an ambition statement.

That’s one of the problems with the commitments made. They are long-term commitments and CEO tenures are shorter. Same as politicians. It is an easy stand to take with long-term commitments. I’d rather have them make the commitment, than not. But it is a big gap from commitment to execution at the moment. And for that you need people to know what they are doing. And you need to democratise the information and knowledge better.

All the asset managers signing up to net zero commitments, and people talking about trillions of money directed to that way. There is that, but it is actually sending mixed signals to companies. They all have different approaches and they’re trying to just look better than each other. And they don’t really know how to get there. You’re not going to make capital cheaper and give oxygen to the better companies, that way.

There’s definitely a gap between knowledge to execute and the grand gestures that are made. I don’t think any of this is intentional. Is it a worry? Yes. Is it intentional? No. But is it excusable? No.

Because if I put my money in something which is billed as an ESG fund, without a clear definition, I’ll probably make my own definition of what it is. And that’s the first opportunity for potential misselling.

Then there are people who don’t know actually how to do it and that’s the second unintentional misselling.