August 6, 2021
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How do you know an ESG fund is really making an impact? How can you be sure a company is doing what it says it’s doing, and truly delivering stakeholder value?
Regular readers will know these questions have been on our mind for a long time. Events this past week have shown the reality of what’s at stake
For starters, a report from Bloomberg drew attention to the fact that while the world is on the path to passing an all-time record of green bond issuance (previously set last year at $309 billion), we still for the most part cannot tell where this money is going.
We also saw an ousted former CSR chief at DWS, Deutsche Bank’s asset management arm, allege the company’s ESG funds did not match the level of commitment the firm claimed (which DWS denies) – just as the company announced the update of nine of its Europe sector ETFs to being ESG-centric.
What happened at DWS could have happened pretty much anywhere. It’s symptomatic of the state of the entire ESG industry, where clear, consistent, and objective measures of performance are still the exception, not the rule. This is gradually changing, of course, and it’s no surprise, then, that JPMorgan Chase’s posting this week for a head of ESG integration highlights overseeing “a more robust process for evaluating ESG metrics across our discretionary and brokerage investment platforms” as part of the job description. The market will soon expect nothing less.
SEC Chair Gary Gensler knows this. “Labels like ‘green’ or ‘sustainable’ say a lot to investors,” Gensler said in a Principles for Responsible Investment webinar last Wednesday. “Which data and criteria are asset managers using to ensure they’re meeting investors’ targets – the people to whom they’ve marketed themselves as ‘green’ or ‘sustainable’?” Gensler announced that the SEC is reconsidering its naming rule for ESG funds, and has asked his staff to prepare a mandatory climate risk disclosure proposal for companies by the end of the year.
There is still much work to be done, both in terms of industry specifics and human capital metrics. But we’re making headway, and that’s why I am so proud to represent JUST Capital in the G7 Impact Taskforce’s Working Group on Impact Transparency and Integrity.
Be well,
Martin Whittaker