2020 marked a turning point in the financial community, a point at which financial gain became irreversibly tied to going green. Companies in need of investment could no longer be deemed the greatest polluters of the plan, and net-zero targets went to the top of the priority list, right alongside revenue and EBITDA margins.
What sounds like a turn for the greener, others are calling a “deadly distraction.” In a USA Today opinion piece Tariq Fancy (former chief investment officer for Blackrock’s sustainable investing division) said that he led the charge to make ESG an investment norm, telling the world how sustainability benefits the bottom line. In the end, he said, it became marketing hype and PR spin, which isn’t going to do any favors for our warming planet.
ESG investments captured $51.1 billion of net new money from investors in 2020, according to Morningstar. We’re talking unprecedented amounts of money being poured into companies that preach environmental evangelism and carbon conservatism. But the question on Tariq Fancy’s mind is whether we are fooling ourselves to thinking that green investments can really turn around our planetary track record.
U.S. climate envoy John Kerry believes the banks must be on board. He has reached out to his friends on Wall Street to propose a net-zero banking alliance between the six majors: Citi, Wells Fargo, Bank of America, Morgan Stanley, JP Morgan, and Goldman Sachs. Kerry wants commitment and he wants action, but exactly what that action is remains unclear.
Perhaps the problem is the non-specificity of the climate requirements for companies and their investors? Unclear net zero goals and a freshly launched “green pushes” simply aren’t cutting it, according to Daniel Firger of Green Circle Capital advisors, calling the climate pledge too “vague” in Politico.
For a company built on the idea of greener investing, Aker Horizons (a part of the Aker group) aims for greater scrutiny and higher standards when it comes to corporate climate ambitions. CEO Kristian Røkke believes that investors can’t incentivize greenwashing, but rather need to set real commitments and requirements for companies to make a true impact.
“Our investment strategy is founded on what we call planet-positive investing. Any company or solution we invest in needs to make a substantial positive contribution towards fighting climate change or improving life on earth. Our climate ambitions – to generate more than 10 gigawatts (GW) of renewable energy capacity and contribute at least 25 million tonnes in annual emission cuts – stand side-by-side our financial return targets,” said Røkke.
This debate will continue to play out on the world stage and will most certainly come to a head during the Biden administration, where climate remains a hot button issue at the head of the agenda.