Environmental, social and governance investing issues made headlines at the World Economic Forum in Davos, as big bank CEOs and asset managers lamented the state of sustainability efforts facing increased scrutiny from investors and regulators globally.
Larry Fink, chief executive and chairman of BlackRock Inc., kicked off ESG discussions on the opening day of the forum by recognizing the firm took a $4 billion loss as a result of the backlash against ESG investing. BlackRock’s iShares is the world’s biggest ETF issuer.
“The attacks are now personal,” Fink told the Davos, Switzerland crowd. “They are trying to demonize issues.”
Yie-Hsin Hung, president and CEO of State Street Global Advisors, also noted politicization of ESG issues in the U.S., calling the anti-ESG backlash “challenging” in an interview with Financial News.
Regardless of the backlash, demand for global adoption of ESG standards is growing, along with increasing numbers of high-profile advocates.
Brian Moynihan, CEO Of Bank of America Corp., said at the forum on Wednesday that official global standards on sustainability and climate were needed to “align capitalism with what society wants from it,” according to a CNBC report.
Alignment on definition and metrics, and support from high-profile advocates, which has long dominated ESG industry events and discussions, will be critical to the long-term success of these ideas.
Net Benefit for the Industry?
Longtime ESG industry players and evangelists see 2022 as a blip and remain bullish on long-term ESG performance and outlook, despite mounting criticism and politicization of the terms.
“Let politicians punch it out between themselves; we're focused on finance,” said Elysabeth Alsano, CEO of VegTech Invest and advisor on the VegTech Plant-based Innovation & Climate ETF (EATV). The ETF was certified as carbon neutral by Ethos ESG this week, saying that its companies can now avoid carbon emissions “by replacing animal products for a less carbon intensive food and materials supply system.”
Alsano thinks the criticism of ESG will ultimately help the efforts.
“Very few ETFs are run by sector experts, and I think this onslaught against ESG is only going to make the authentic voices rise to the top,” she noted.
Alsano said the ESG industry is a “big basket” that includes a variety of sectors, trends and variables. One way for ESG investors to navigate uncertainty is to stay focused on specific themes.
“Pick your megatrends that you believe in that you think are going to be better for the planet,” she said. “We believe in the megatrend of a global shifting food supply system—I don't have to believe because I already see it happening.”
EATV is up 5.6% year to date and was down 24.45% last year, according to ETF.com data.
Contact Daria Solovieva at [email protected]