A moment of reckoning for ESG

ESG making headlines for all the wrong reasons

Tom Eckett

a tree stump with a squirrel on it

Stuart Kirk and Desiree Fixler are two names at the heart of the turmoil taking place in asset management, an industry that is losing investor trust over whether it can deliver in the transition to net-zero emissions.

For entirely different reasons, the duo have found themselves on the front pages in recent weeks as firms look to grapple with how to best capture sustainable investing.

Fixler – the former group sustainability officer of DWS turned whistleblower – claimed the German asset manager made misleading statements about its ESG credentials causing the Securities and Exchange Commission (SEC) and German regulator BaFin to launch probes into greenwashing.

This culminated last week the firm’s CEO Asoka Woehrmann resigning after police raided the offices of DWS and its majority owner Deutsche Bank for information on the greenwashing allegations made by Fixler.

While DWS strongly denied the claims made by Fixler, it only reported €115bn ESG assets for 2021 following her complaint and a change in its ESG criteria, down from €459bn the year previously.

Meanwhile, HSBC Asset Management found itself in hot water after the firm’s global head of responsible investments Stuart Kirk said investors should not worry about climate change risks.

“Climate change is not a financial risk that we need to worry about,” Kirk said at the FT Moral Money Summit, “Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are always wrong.”

Kirk – who has since been suspended by HSBC – caused more than ripples at the UK bank which responded by stating the company is “committed to driving the transition to a sustainable global economy”.

The big question is how the two asset managers under microscope respond. There is serious business risk in both cases and the two examples highlight what a failure in delivering best outcomes to investors can bring.

As Damien Lardoux, head of impact investing at EQ Investors, told ETF Stream: “We do not own any HSBC AM funds or ETFs and this definitely making me quite cold to carry due diligence on any of their ‘responsible’ products.”

In response, investors must assess which ETF issuers, or asset managers, are looking to have a genuine impact and which are simply looking to repackage strategies with a higher fee attached.

Despite this, the ESG space is still very much in its infancy with the subjective nature leading to many discrepancies from both top-down and bottom-up perspectives.

The EU Taxonomy should hopefully go some way in addressing these issues by clearly defining what ESG is and potentially more importantly, what it is not.

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