Investment Funds Can’t Quit Climate Change

Despite conservative disdain for ESG initiatives, one research project found climate change remains a chief concern for asset managers.

(Photo by Anders J on Unsplash)
(Photo by Anders J on Unsplash)

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Funds are hedging their bets on a cleaner planet.

Despite conservative disdain for environmental, social and governance (ESG) initiatives — or “woke” capitalism, as they call it — one research project found climate change remains a chief concern when asset managers choose not to invest in portfolio companies, the Financial Times reported.

It’s Not Easy Not Being Green

The conservative take is that ESG is a thinly veiled leftist agenda that sacrifices returns for ideology. And the impact of that allegation continues: Anheuser-Busch’s stock has yet to recover from the backlash to its partnership with transgender celebrity Dylan Mulvaney, while asset manager BlackRock has significantly eased its support for ESG proposals from its portfolio companies.

But the reality behind investing motives is likely more nuanced:

  • Research compiled by a collection of non-governmental organizations looked at 150 pension funds, banks, and insurance groups around the world and listed 4,500 companies that were excluded from many portfolios. While some financial institutions cited tobacco and weapons manufacturing as their reasons for not investing, 40% said climate change was their determining factor.
  • Some of the most excluded groups included fossil fuels companies like Cenovus Energy, Suncor, and ExxonMobil. Beyond the concern for the planet, investors are thinking with their wallets — like they’ve always done — seeing fossil-fuel stocks as hard to sell off when green energy sources become more popular.

“Fossil fuels are becoming a ‘sin’ industry,’” Ward Warmerdam of Dutch consultant Profundo told the FT. “[It should] spur oil and gas companies to speed up their energy transition efforts with concrete and immediate actions to avoid losing investors.”

Too Hot for Jumpers: Climate change doesn’t bode well for retailers. Clothing companies listed on the FTSE 100 index like Next and Marks & Spencer are pushing their autumn and winter lineups right now, but customers and investors are uninterested as summer temperatures in England have bled into October. The two retailers saw their market caps drop by a combined $610 million on Monday following anxious analyst comments. Before we know it, “fall fashion” will be an obsolete phrase.