A provocative speech on climate change that led to the suspension of HSBC’s chief executive split the asset management industry.
“Who cares if Miami is six meters underwater in 100 years?” Asked Stuart Kirk, head of responsible investment at HSBC Asset Management, at an FT conference last week. “Amsterdam has been six meters underwater for centuries and it’s a really nice place. We will deal with it. “
Many in the industry disagreed with Kirk’s tone. “Sticky, non-standard remarks do no favors,” said one CEO. Another said, “He may have been trying to be too smart.” But some welcomed Kirk’s desire to expose group thinking and highlight some of the inconsistencies in environmental, social, and managerial investments.
“I welcome the opposite view, as the ESG market is sometimes too one-sided,” said Desiree Fixler, a former head of sustainability at DWS who was fired and later claimed that the German asset manager had misrepresented how he used ESG indicators to analyze companies everywhere their investment platform. “ESG has become such a huge fundraising machine that even the suspects jumped on board.”
Hendrik du Heu, CEO of Asset Manager Ninety One, said: “This has given us food for thought and encouraged a healthy debate on the greatest existential topic of our time. That doesn’t change the fact that we have to deal with the climate challenge, which affects the vast majority of the world’s population and resonates far beyond the S&P 500. ”
Petra Dismore, CEO of NorthPeak Advisory, said: “It’s always good to have two sides to the debate. The biggest problem with ESG is that everything has become so polarized and politicized. ”
ESG factors are financially significant in the long run. We must continue the course.
Few were willing to publicly criticize ESG, the fastest growing corner of the asset management industry. “I just don’t want to go there, it’s too sensitive,” said a London-based fund manager. “ESG net zero zeitgeist is so omnipotent that you just can’t stand in his way.”
Global Sustainable Funds’ assets have tripled in the last three years, rising to $ 2.77 trillion at the end of the first quarter of 2022, from $ 1 trillion in 2019, according to Morningstar.
This has led to a battle for talent, a gold rush in product development and breeds an entire industry of related consultants and data providers, adding another layer of cost to investors. Meanwhile, the industry is facing growing allegations of “greenwashing” – unfounded environmental claims by companies that seek to wash away their image without making major changes.
Asset managers have sharply criticized Kirk’s claim that climate risk does not pose a financial risk to investors. “ESG factors are financially significant in the long run,” said Michelle Scrimgeour, CEO of LGIM, the UK’s largest asset manager. “We need to continue the course.”
Saker Nusseibeh, CEO of Federated Hermes, said: “Real investment opportunities require long-term planning – including ESG factors – along with traditional financial ones and require real commitment and dialogue with the companies in which you invest. If your time horizon is shorter, then this is a completely different debate with different parameters and risk perspectives.
“Climate risk is a risk that investors should be concerned about,” added John Jones, chief executive of Liontrust Asset Management in the UK. “Climate change, population migration and biodiversity loss are all things that affect companies and businesses.”
Approaching Larry Fink, chairman and CEO of BlackRock, Jones said the climate transition marked “an important investment opportunity for investors to provide capital for new technologies and business models.”
Kirk’s complaint about the net amount of work on tackling the financial risk of climate change has hit a string in the asset management industry, which is burdened by documents and reporting requirements.
“ESG is in danger of becoming a bureaucratic tax for investors and shareholders,” Fixler added. “We live in a world where ESG executives are paid for PR statements and aspirations, not for real impact.”
HSBC declined to comment.
Additional reports from Owen Walker in Zurich
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