Two interesting and not unrelated FT articles today that back much of what we have been writing about with respect to ESG. The first is a critical article, calling out false claims around net-zero portfolios – targeting Brookfield and more importantly, climate champion Mark Carney. Earlier in the year Mr. Carney, who apart from being head of impact investing at Brookfield is a UN climate advisor, claimed that Brookfield’s portfolio was net-zero, in that the fossil fuel investments held by the asset manager were offset by the clean energy assets also in the portfolio. A subsequent audit has shown this not to be the case and Brookfield has had to walk back the claims. The article talks about creative sustainability accounting as well as greenwashing, but also points out how “thin the ice is” when trying to argue your way to net-zero. It is also another cry for help for better and more standardized definitions concerning what is reported on a company-by-company basis and then how it is interpreted and calibrated relative either to peers or to past performance. We have noted with concern, that an absence of direction from Washington on climate action leaves the investment community as the loudest voice and most relevant “activist” for climate change behavior, but if the group is working with inaccurate data and inconsistent methodology for measuring data and taking action based on it, all sorts of abuse and mistakes are possible – resulting in some possible unintended consequences – we would encourage you to read the ESG and Climate report from last week – linked here.
The second article is around the formation of two new ETFs at Blackrock focused on something we have been expecting for a while, the derivative of straightforward climate-friendly investment. The funds will focus on identifying opportunities to invest in change – companies or industries that are taking positive steps to move towards more sustainable business. We raised this idea a couple of years ago, in the context of a next logical step once the primary ESG objective of getting data from corporates had been achieved – once you had something to measure you could start judging companies based on how they improved on the metrics that were being measured – the easiest being carbon footprint on the environmental side. These Blackrock funds are jumping the gun a little as we still do not have either accurate or consistent data or agreed on forms of comparison – see above – but that has not deterred Blackrock and the funds have attracted a significant flow of new capital already. These new Blackrock funds add even more to a rising ESG pool of cash. See our recent ESG & Climate piece.
Source: Bloomberg; C-MACC Analysis