Corah: investors are ‘not winning on climate change’
Panellists at Net Zero Investor’s Annual Conference discussed whether ESG investing is achieving real-world impact on climate change.
Investors are “not winning on climate change” as environmental, social and governance (ESG) investing is not yet achieving real-world impact, the head of sustainability at CCLA has stressed.
James Corah, introducing the opening panel debate at Net Zero Investor’s Annual Conference, said that ESG investors should be focused on tackling climate change. However, he outlined to delegates that, despite investors’ focus on ESG investing, carbon emissions are “still going north”.
“My Scottish football hero, as a Notts County fan, is a gentleman called Jimmy Sirrel. He has a famous phrase – ‘the only thing that matters is winning, the rest is just gossip’ – and quite clearly here on climate change right now we are not winning.”
Nazmeera Moola, Ninety One’s chief sustainability officer, explained that the reason why ESG investing is not “winning” is because investors are focused on “ESG integration” to produce financial returns rather than “impact investing”.
She said: “We need to become much more deliberate about differentiating between ESG integration and impact investing.
“ESG integration is just assessing the financial risks, impact investing is that you have one specific, measurable non-financial objective that you are seeking to impact. And very few funds in our portfolio invest with that higher hurdle,” she said.
Moola highlighted that 24 companies in Ninety One’s portfolio account for 50% of financed emissions. “Therefore, it’s not that difficult to decarbonise our portfolio, as we can do this by selling a lot of our high emitters. But it is much more difficult to achieve real-world change, which is where engagement is necessary.”
In addition, Alex Edmans, professor of finance at the London Business School, argued that ESG investing should not be driven solely by “a financial result”, but actually because it will make a difference in terms of issues such as diversity.
He said: “Why don’t you just do it because it’s the right thing to do, not because it’s going to be improving your long-term shareholder returns?”
In the session, Paul Watchman, special legal advisor at UNEP Principles of Sustainable Insurance Net Zero Insurance Alliance, highlighted the current wave of anti-ESG bills that have been proposed or adopted in multiple Republican states across the US.
The bills prohibit or significantly limit state governments from adopting ESG-focused investments or from doing business with financial institutions that adopt specific ESG policies.
Watchman said: “In the US particularly, the Republican senators are actually breaching fiduciary duties, because it [climate change] is a real risk, and it should be taken it into account.
“So, saying you can't take it into account is completely unlawful.”
This debate comes as Tariq Fancy, former chief financial officer for BlackRock, criticised ESG investing for being a “dangerous placebo and an agent of political bias”.
In response to political bias on ESG considerations, Wilhelm H Mohn, Norges Bank Investment Management’s global head of corporate governance, stated that the bank has been set up to avoid bias.
He said: “Our mandate is seeking, at least in Norway, the broadest possible consensus in parliament. So, our net-zero target is actually very broadly anchored in at least domestic politics.”