Over the past several years new “green” businesses and industries have been born to try to address, and hopefully slow down the climate crisis, bringing Planet Earth back to a sustainable balance for all it’s inhabitants. With all this effort and energy focused on lowering carbon emissions and increasing oxygen levels, also comes the need for capital funds to keep the ball rolling.
“Green inventing” is one of the buzzwords that have been born from the climate crisis, and although is sounds good, there is dissent amongst investment professionals regarding it’s viability.
In January 2020, BlackRock, Inc., global investment manager and fiduciary, was all over the headlines with the approach to investing. BlackRock’s CEO, Larry Fink, in his letter to investors, outlined how they were going to focus on sustainability, noting, “Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors. And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”
Fast forward to 2021, and not everyone is on the same page. According to a recent interview with Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing, published by The Guardian, Fancy was quoted as saying, “In many cases it’s cheaper and easier to market yourself as green rather than do the long tail work of actually improving your sustainability profile. That’s expensive and if there is no penalty from the government, in the form of a carbon tax or anything else, then this market failure is going to persist.”
There is additional support for this position. According to a Market Watch article, “some ESG fund managers say divestiture doesn’t work.” The article offers and interesting option. “Advocacy works in a way that divestiture doesn’t, says Chris Meyer, manager of stewardship investing research and advocacy at Praxis. The fund family targets their advocacy by engaging with specific companies to influence their transition to greener energy.”
As the conversation continues on how investors can actually make a difference in keeping the planet inhabitable for all of us, BlackRock launched a new sustainability fund, U.S. Carbon Transition Readiness.
This seems to be a step in the right direction, however, The Wall Street Journal offers this perspective. “You need to understand two fundamental facts about ESG or “sustainable” investing. First, corporate responsibility is in the eye of the beholder; one investor’s paragon is another’s pariah. Second, ESG is the last best hope for investment firms seeking to hang onto fat fees.”