ESG Investing and the State of Current Affairs - My Perspective
As I reflect on the first quarter of the year there is no escaping the fact that the crisis in the Ukraine has overshadowed everything else, and with good reason. It has also perpetuated and accelerated some of the challenges that were preoccupying many of us before the war broke out like the increased market volatility that began late last year and global supply chain issues across industries. Or, for impact investors in particular, the growing daily threat of climate change, our biggest global challenge.
I know from hearing from my conversations with some of you that the trigger-happy critiques of ESG investing that came out in the days following Russia’s invasion caught some of you by surprise. Well I’m here to reassure you that your convictions to invest your capital alongside your values will win the day for your portfolio and save our planet over the longer-term.
In some ways, these critiques point to ESG’s being a victim of its own success. The fact is that anytime you have enormous growth, you’re going to invite criticism. If there is one takeaway from the war in Ukraine, it’s that we clearly can no longer afford to solely rely on one country or one industry from our economy.
As Thomas Friedman points out in his brilliant commentary from late March, our addiction to fossil fuels has geo-political ramifications that go far beyond stopping climate change. Friedman argues that if we truly want to end our addiction to oil and stop climate change, then we have to acknowledge how this addiction has distorted our commitments to human rights, our national security and yes, the environment. What’s undeniable is that for decades the West has funded both sides, complicating our ability to address the current crisis but also creating an enormous lag on our efforts to drive solutions towards climate change.
While I don’t purport to be an expert on geo-politics, I am deeply knowledgeable on impact investing, and there’s a lesson here for all of us ESG investors. ESG investors are tackling deep-seated, complex problems that affect our planet and every aspect of our society. But we, too, can’t have it both ways. We can’t dip in and out of fossil fuels when oil or other commodities prices spike and reduce our exposure when they fall. And as we now have daily proof, we can no longer pretend that this is just about the money. How we invest matters.
Like any other investment short-term performance will fluctuate, but ESG investors have no choice but to play the long game, especially now when it has become so clear that our fossil fuel addiction is damaging our very social fabric while ravaging our planet. We are at an inflection point – politically, socially, environmentally. I ask each of you to stand together and stay the course in continuing our fight towards a more just and safer world.
In partnership,
Jenn