ESG: Putting your money where your mouth is
Advocating ESG while investing in one of the world’s largest oil companies is an uneasy truth.
It is naive to point out that it is all about money, but in the case of international relations – and of business and investing – making the world a better place doesn’t trump a pay cheque.
It seems impossible to go to a meeting in London without a quip about how environmental, social and governance (ESG) is integral to every investment mandate.
Yet responding to questions as to whether the ESG overlay of many funds may mean they choose not to invest in the upcoming initial public offering (IPO) of Saudi Aramco, one London-based asset manager said that while his clients “won’t buy coal”, oil is of no concern.
“It’s the way you spin it,” the investor says. “Any restrictions would probably be related to Saudi directly, to women’s rights and the rule of law.”
There is an uneasy relationship between firms advocating a sustainable revolution, virtue-signalling investments to end the socio-environmental ‘crisis’ and the need to deliver returns.
Some funds, of course, will simply choose not to invest, but the problem that arises is passive investment. No matter how committed the firm is to sustainable development, they may end up holding this company anyway.