It has been revealing to follow the conversation around ESG funds in light of the current devastation occurring in Ukraine. The article in the first url below sums up things nicely and is reasonably representative of an emerging critical line of argument:
"According to Bloomberg data, ESG funds had at least $8.3 billion invested in Russia before Putin attacked Ukraine on Feb. 24. Today, the precise value of these holdings isn't known because the market in Moscow remains shut and sanctions have made Russian securities virtually untradeable. And to be sure, it's a tiny fraction of the estimated $2.7 trillion invested in sustainable funds."
Nevertheless, quite damning when we consider questions around right and wrong, and what stocks should be included in an ESG fund. Further, it is not as if these funds were shining examples before the invasion occurred, as the article in the second url below suggests:
"In fact, the largest ESG-focused exchange-traded fund—the $22.9 billion iShares ESG Aware MSCI USA ETF (ESGU)—has almost 3.1 percent of its assets invested in the oil and gas sector, the industry most responsible for the accelerating destruction of the planet's atmosphere."
The article in the third url below captures the moral complexity perfectly by noting that what is considered right/wrong or helpful/unhelpful is not something that we can easily agree on at any given moment, let alone over time as circumstances change:
"The first approach to ESG is to try to do good with your money, and almost every ESG fund tries to imply it does this, at a minimum excluding producers of controversial weapons and the most-polluting forms of coal. Marketing materials are filled with pictures of sunflowers and green fields. But what counts as acceptable behavior changes rapidly. Russia's invasion of Ukraine has shown ESG investors what should have been obvious, that a country can't defend itself without weapons, and that means funding weapon manufacturers. … Soaring oil and natural-gas prices as a result of Russia's invasion and sanctions have prompted about-turns from Western governments, too. Just five months after hosting the Glasgow climate summit at which world leaders agreed to phase out fossil-fuel subsidies, the U.K. is cutting taxes on road fuel and trying to shield households from energy costs, while encouraging Gulf states to drill more oil. The U.S. is calling on frackers to pump more, and some European countries want price controls."
The conclusion I take away from all this is that we are simply not serious about the task at hand. To achieve the level of reductions in greenhouse gas emissions that we need to stabilize the environment in ways that give us hope for a future livable planet is not something we have yet come to terms with. This is particularly evident because, not only are we not making sufficient effort, but it is abundantly clear that we do not have a plan, either. The scale of change that is required is massive, and we are simply tweaking the edges. The metaphor of rearranging deckchairs on the Titanic comes to mind.
Take care
David
David Chandler
© Sage Publications, 2020
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Russia's War Casts Huge Shadow Over Future of ESG
By Tim Quinson
March 9, 2022
Bloomberg Businessweek
Greenwashing Is Increasingly Making ESG Moot
By Tim Quinson
March 16, 2022
Bloomberg Businessweek
Do-Good Investing is Under Pressure
By James Mackintosh
March 28, 2022
The Wall Street Journal
Late Edition – Final
B1, B8
