December 6, 2023

ESG has Over the past 12 months, under pressure from some Republican politicians in the US, they have called on investment managers to pull client money out of ESG-focused investments.

Simply put, their argument is that ESG prevents investors from acquiring assets such as fossil fuels, and in doing so, they will miss out on the soaring valuations of fossil fuel companies fueled by rising energy prices. Those on the ESG side therefore argue that continuing to adhere to ESG principles in today’s marketplace is a failure of investment managers’ fiduciary duty.

This of course ignores a rather fundamental challenge: the Intergovernmental Panel on Climate Change (IPCC) In the most recent AR6 report G7 economies need to reach net-zero emissions by 2040, not 2050, if we are to avoid catastrophic climate change, he said.

At the United Nations Climate Change Conference in 2021, countries pledged to reduce the use of oil and fossil fuels. The IPCC’s latest scientific assessment sets the stage for a future climate change conference (not too far away), which promises to scale up the use of fossil fuels and accelerate major investments in an electrified and decarbonized future.

Whether you believe in ESG or subscribe to a “woke capitalism” perspective, it cannot be ignored.

From this perspective, therefore, the fiduciary duty of investment managers implies a long-term necessity to ensure that the funds they manage are not invested in assets that will become stranded or obsolete. In other words, investing using ESG metrics and supporting renewable energy and climate technology types of investments makes economic and investment sense in the long run.

This approach is one we follow, and we are not alone.Despite recent controversies, the ESG investing market Estimated to be worth $53 trillion globally by 2025 According to data from the European Fund and Asset Management Association (EFAMA), reported by Bloomberg, the highest environmental, social and governance classification in the EU, known as Article 9, Attract €26 billion ($28 billion) in revenue in 2022Meanwhile, bond funds have seen client outflows exceed those seen since the global financial crisis in 2008, while equity funds have also suffered, losing 72 billion euros over the same period.