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Recently, the ever-vigilant John Hinderaker at Power Line called our attention to a Wall St. Journal article (1) which posits that “the ESG brand probably has its best days behind it.” The author, Jon Sindreu, comes to this conclusion because:
- The percentage of new funds with “ESG” or “sustainable” in their names has declined from 8.3% in 2022 to 3.3% today.
- Google searches for “ESG investing” have declined dramatically in the last year.
- Mentions of “ESG” in companies’ reference calls with analysts have also declined by over 50% since 2022.
- The amount of money flowing into funds with “low carbon,” “decarbonization” or “carbon transition” in their names has gone negative.
Though this may be the high-water mark for the ESG “brand,” I believe that just because the public’s appetite for ESG-themed funds is waning does not mean that ESG will loosen its grip on the investment process.
According to bfinance, “90% of asset managers have dedicated ESG personnel.” (2) There is an old saying in public policy circles: “policy is personnel.” It means that policy is not created by Spock-like disinterested parties; it is shaped by the training, beliefs and desires of those who work on it.
Google the ESG personnel of any investment organization and look at their bios. I did this for Federated Hermes, and I think you will find the background of Gemma Corrigan and Ingrid Holmes representative. In 2021, Gemma was named head of policy and advocacy within Federated Hermes' responsibility office, after serving as a senior economist with the World Economic Forum, where she acted as lead for the Sustainable Markets Initiative aimed at accelerating an industrywide transition to sustainable markets and rapid decarbonization. She replaced Ingrid, who went on to become Executive Director of The Green Finance Institute. (3)
These are not investment people as traditionally defined, trained to earn the best risk-adjusted returns for their company’s clients. They are part of the global ESG industry, which is a branch of the climate change industry. Their world is ESG. They are crusaders bent on saving the planet, and they move seamlessly between investment companies, non-profits, government agencies and NGOs.
Most of these employees are not connected to a particular ESG fund within a company; they oversee and influence the policy of the whole investment organization. If all ESG funds dried up tomorrow, they would still have jobs shaping ESG policy at their companies. Larry Fink may have stopped using the term “ESG,” (4) but has Blackrock laid off any ESG staff or moved them to other departments? If the ESG brand becomes tarnished, will these righteous warriors learn how to code, as Joe Biden infamously advised coal miners to do? (5)
I doubt if the answer to either of these questions is “yes.” ESG personnel have become a beast unto themselves. They will continue to have substantial influence within investment management organizations, to labor for their own pecuniary self-interest, and to champion net-zero. They will not “go gentle into that good night.” The beast must – and will -- eat.
- https://www.wsj.com/finance/investing/why-esg-investing-might-never-recover-7aa9e7c9
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https://www.bfinance.com/insights/esg-assessment-challenges-in-investment-manager-due-diligence#:~:text=On%20the%20staffing%20side%2C%20our,managers%20have%20dedicated%20ESG%20personnel
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https://www.pionline.com/esg/federated-hermes-names-head-esg-policy
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https://www.forbes.com/sites/jonmcgowan/2024/03/27/blackrocks-fink-calls-for-energy-pragmatism-omits-esg-from-annual-letter/?sh=51e66c624df2
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https://thehill.com/changing-america/enrichment/education/476391-biden-tells-coal-miners-to-learn-to-code/
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