Magda Wierzycka caused a mild stir recently when she described environmental, social and governance (ESG) investing as “largely meaningless”. Her point wasn’t that ESG isn’t relevant but that many companies use it more for marketing than making a real difference. While that prompted a few eye-rolls on Twitter, the truth is she has a point.
Companies often do speak with a forked tongue on ESG. They’re happy to showcase their fair-trade coffee in the canteen or the rainwater-harvesting facility at their new environmentally friendly head office, but start asking questions about their blatant hypocrisy and they quickly obfuscate.
Take Standard Bank, which is trying to position itself as Africa’s leader in green finance. It even has a Sustainable Finance business unit and recently issued SA’s first offshore green bond. What they’re less keen to talk about is their financing of coal mining projects or their role in Total’s controversial East African Crude Oil Pipeline (Eacop).
Asset managers Coronation and Ninety One also trumpeted their ESG commitments in their recent results presentations. Coronation has asked 89 JSE-listed companies to adopt the framework prescribed by the Task Force on Climate-related Financial Disclosures in their integrated annual reports, while Ninety One has joined the Net Zero Asset Managers Initiative, which aims to only support investments aligned with achieving net-zero fossil-fuel emissions by 2050.
But if you really want to know what your asset manager thinks about the first two letters in ESG, forget about the global initiatives they’ve joined. Instead, ask them to give you a tour of their executive parking lot, where you will no doubt see row upon row of imported luxury vehicles, most of which make their way to SA from Europe via diesel-powered ocean-going vessels. If you’re more concerned with the G in ESG, then just bring up Steinhoff or Tongaat Hulett. Alternatively, if you’re feeling really combative, you could open the can of worms that is executive pay, which gets routinely approved by asset managers at annual general meetings no matter how obscene.
However, we can’t let ourselves off the hook. When it comes to climate change or environmental concerns, most of us aren’t much better than the corporate aristocrats we like to point fingers at.
Just like them, we too are guilty of spectacular ESG hypocrisy from time to time. We bemoan the financing of a coal mine but complain bitterly when SA’s failing coal-fired electricity grid deprives us of an evening of Netflix. We rage at oil pipelines but few of us are willing to ride a bicycle to work.
However, by far the best example of this insincere ESG piety comes from a not-so-obvious candidate: outdoor clothing brand The North Face. The US firm recently became the centre of a social media storm when it refused to sell 400 branded jackets to a Texas oil firm on the grounds that it didn’t want to be associated with fossil fuels.
Unfortunately the move backfired spectacularly when Liberty Oilfield Services, which as its name suggests services the oil and gas industry, launched a Donald Trump-style counterattack replete with videos lampooning The North Face’s apparent hypocrisy. The inconvenient truth is that virtually 90% of the synthetic fibres The North Face uses in its apparel are made from petrochemicals. That prompted an avalanche of ridicule that culminated with the Colorado Oil and Gas Association mockingly awarding The North Face its first-ever “Extraordinary Customer Award”.
It’s hard not to crack a smile at the irony of it all, but the truth is that there’s a little bit of The North Face in all of us. While it’s easy to sneer at Wierzycka’s apparent dismissal of ESG as mere marketing, the fact is that many companies do just pay lip service to the concept. There’s even a word for it: greenwashing. Harder still is admitting that many of us are guilty of it too.
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