ESG: Are Wall Street’s Sustainable Investments “Duping” the Public?
Well, it was fun while it lasted. We now return to our regularly scheduled series of ESG-related lead blogs. Yesterday, the SEC released the agenda for tomorrow’s meeting of its Asset Management Advisory Committee. Topping that agenda is a discussion of the ESG subcommittee’s recommendations on improving “the data and disclosure used for ESG investing, in order to create better transparency for investors, and better verifiability of investment products’ ESG strategies and practices.”
The subcommittee’s recommendations address both issuer disclosure and ESG-themed investment products. On the issuer side, the subcommittee calls on the SEC to adopt a standardized framework for disclosing material ESG risks – a process that the subcommittee acknowledged would be “lengthy and complex.” On the investment products side, the recommendations start with asking “How can we avoid ‘greenwashing,’ that is, investment products bearing the name ESG but not actually engaging in meaningful ESG investment?”
That focus on greenwashing is timely, because the AMAC meeting will be held just a few days after the publication of a scathing opinion piece by Tariq Fancy, BlackRock’s former head of sustainable investments, on how ESG investment products are “duping” the public. This excerpt gives you a sense for the tone of the piece:
The financial services industry is duping the American public with its pro-environment, sustainable investing practices. This multitrillion dollar arena of socially conscious investing is being presented as something it’s not. In essence, Wall Street is greenwashing the economic system and, in the process, creating a deadly distraction. I should know; I was at the heart of it.
As the former chief investment officer of Sustainable Investing at BlackRock, the largest asset manager in the world with $8.7 trillion in assets, I led the charge to incorporate environmental, social and governance (ESG) into our global investments. In fact, our messaging helped mainstream the concept that pursuing social good was also good for the bottom line. Sadly, that’s all it is, a hopeful idea. In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community.
I’m not sure what to make of the fact that this appeared in – of all places – “USA Today.” That’s a publication I’m more accustomed to turning to for high school football rankings than for financial analysis & opinion, although I guess that’s beside the point. Anyway, if you read the whole thing, you come away with a feeling that the SEC’s new enforcement task force is going to find a target-rich environment when it comes to ESG themed mutual funds & ETFs.
-John Jenkins, TheCorporateCounsel.net March 18, 2021
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