Opinion | ESG financiers need to first practise what they preach on climate change and net zero

Truly delivering net zero and combating social and environmental injustice requires mostly perspiration, which means that real people and companies have to deliver

Financial wizards, meanwhile, can just claim they are doing their fair share by policing ESG

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Activists dressed as “debt collectors” hold cutouts of world leaders during a demonstration in Washington, US, on October 13, 2021. Photo: AFP

Published: 3:30am, 16 Jul 2022Updated: 3:41am, 16 Jul 2022

It’s fashionable to talk about ESG investing. But will it make a difference to people and the planet? The environment, social and governance (ESG) framework evolved out of the UN Sustainable Development Goals for 2030. It is a fundamental shift away from the corporate “shareholder value” maxim that focuses on delivering profits without considering a firm’s responsibility to society or the environment.

The model gained global attention in 2021 when the Glasgow Financial Alliance for Net Zero (GFANZ), led by UN Special Envoy for Climate Action and Finance Mark Carney, corralled 450 members representing US$130 trillion in assets to unite net-zero finance initiatives from across sectors and countries in one “industry-wide strategic alliance”.

In Carney’s words, “GFANZ is accelerating the best-practice tools and methodologies that are essential for ensuring that the climate is at the heart of every financial decision”.

As a vision, ESG looks impeccable, except one needs to ask – whose vision? Will ESG deliver net-zero results? And who will work hardest to deliver?

My immediate reaction when GFANZ was announced was: how did 450 institutions, mostly in advanced markets, with assets amounting to 1.3 times the global GDP, gain so much power?

If they really cared about net zero and ESG, how come it took so long to switch from short-term greed to long-term value? And if GFANZ will not lend to or invest in companies that do not meet ESG standards, isn’t it more a stick than a carrot?

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