Panel: ESG is ‘ill defined’ but no returns on a dead planet
Industry heavyweights discussed the shortcomings of ESG and the difficulties of reporting on these standards
Is the term ESG helpful for responsible investors? Not everyone in the industry seems to think so.
Richard Manley, chief sustainability officer at Canada Pension Plan Investments, has rejected the three letters as he told a London conference: “I don't do ESG."
He labeled ESG as "an amorphous concept, it's ill defined and becoming a political football. I help investors and portfolio companies manage 21st century business risks," Manley explained to delegates.
The “political football” Manley was referring to is the burgeoning “anti-ESG” movement that is prevalent in the US, and in various forms has already found its way onto the statute books of state legislatures.
Manley made his remarks at Economist Impact’s eighth annual sustainability week, at a panel discussion on the topic of investing in a net zero future.
Also speaking on the panel was Heather Buchanan, co-founder of Bankers for Net Zero, Steve Howard, chief sustainability officer at Singaporean sovereign wealth fund Temasek, Stephen Cohen, head of Europe, Middle East and Africa at BlackRock, and Willie Watt, chairman at Scottish National Investment Bank.
Responding to the difficulties of ESG reporting, Buchanan noted that its structures have been created in little over a decade, in comparison to wider financial reporting which has had its core “language” in place for hundreds of years.
“Until we can get to a point where we all agree what we're talking about, we're not going to be able to move at that pace that we need to”, she said.
I don't do ESG. It's an amorphous concept, it's ill defined and becoming a political football.
During the panel, Howard described sustainable investing as the “growth story of the 21st century.”
However, he did acknowledge the coming challenges in the sector, and for it to be successful receptive public policies and business innovation needed to work together in tandem.
“We must remember from a starting point, that there are no returns on a dead planet.”
The next generation
Another common issue of policy responses to climate change has been their postponement in the face of seemingly more immediately pressing issues, such as current rising inflation and a cost of living crisis in many developed economies.
On how to tackle this, and to both educate and protect the next generation of sustainable investors and the wider population, Cohen said: “There is an overall education that is required around saving for the future, and encouraging the next generation to do so sustainably.
“It’s about seeing climate as material a risk as inflation. If you start to think about it that way, as these are the just the things you need to incorporate, you actually create a lot of behavioural change.”
At the same event there was a discussion on how might geospatial data help reduce climate risk and boost resilience, between John Abel, a technical director at Google Cloud, and Matt Randall, head of finance regulatory and climate change at NatWest.
Of the data challenges within the geospatial space, Randall said: “Taxonomies are just a series of questions. The problem is that the interpretation of those taxonomies means across the network there’s tremendous pressure to gather more information."
"A taxonomy for just simply the agriculture sector means a thousand more questions that you need to ask the farmers across the supply chain to get going," he concluded.
