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ESG Pushback Lands in Europe

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By maurice norbert @ Adobe Stock

You have watched as American politicians and business leaders have pushed back against the ESG movement to protect shareholder returns. Now, the movement to put shareholders ahead of politics has made it to Europe. Niall O’Shea and Hugh Wheelan report for Reuters:

March 14 – Ignored, ridiculed, embraced, sanctified, attacked. If you’ve been living it for long enough, it’s hard not to see the grim humour in the parable of ESG.

That catch-all term, which covers “sustainable”, “responsible” and “impact” investment, is nursing a splendid hangover, and having to contemplate the consequences of over-indulgence. In the U.S., ESG faces outright hostility from political enemies, and the pushback is arriving in Europe, where newly emboldened sceptics have let rip on ESG’s pieties and promises.

Some of the scepticism is deserved: greenwash is rife, and there are too many arguments and practices that don’t stand up to scrutiny. To add to the indignity, ESG now faces regulatory pushback of its own with the EU’s Green Claims directive. Investment firms’ must back up lofty product claims with reference to verifiable evidence and standards.

Let’s get some perspective, though. ESG’s present troubles are an acknowledgement of how far it has come.

At the beginning of the millennium, ESG issues, whether through the perspective of risk, reward or impact, were utterly ignored by investors, apart from some ethical funds.

Some investors would wish it back that way – insisting ESG is the Emperor’s new clothes, markets are broadly efficient, and politicians/technology will solve the huge environmental and social problems we face.

They should not hold their breath, on any of these accounts. Looking systematically at sustainability regulation, energy transition, pollution, executive graft, human/labour rights abuses, the risk of stranded assets etc.; that stuff is staying.

Action Line: Shareholders deserve respect from everyone in charge of their money. From asset managers to executives to board members, a fiduciary duty should be observed. If you want to talk more about an asset manager’s fiduciary duty to clients, I’m here.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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