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Keeping faith with ESG principles is hard to do 

The investment community has been keen to talk about environmental, social and governance investing but many have been reluctant to refer to ethical investing (“ESG: investors must stop trying to do the right thing for the wrong reasons”, Lex, FT.com, March 31).

It is refreshing to read Lex using the terms interchangeably but, outside the faith investors, today it is radical to do so. The mention of ethics implies choices. The current enthusiasm for ESG is welcome but some have been unwilling to say that being ethical can at times — and sometimes for long periods — mean lower revenues and profits than otherwise.

Russia’s war with Ukraine has shown that ESG cannot be divorced from ethics. It has also shown that a focus on ESG criteria, while necessary, is not sufficient. However, while activist investors might promise success, as Lex’s examples illustrate, they tend to focus on specific concerns with a company rather than its overall ethical approach. Activist investors professing ESG credentials face the same ethical challenge from the invasion of Ukraine as do other ESG investors.

First published in the Financial Times on 7 April 2022.

Financial Times letter, 7 April 2022, 08/04/2022

 
Not an easy task given uncertainties, especially if energy and commodity prices do fall later in the year. Ultimately, radical economic reform required.
Central banks are struggling to head off general inflation while dealing with price shocks that will be negative for growth. They waited too long, which has made their tasks more difficult.
Banks continue to fund fossil fuels but have plans to reduce their exposure. My chat with TWR.
The Bank of England has raised interest rates, but that does not mean it has been most effectively managing inflation risks.
My assessment of the finance pledges at COP26 and what really matters.
Investors must not forget about profits, even as they focus on wider criteria.
The Bank should signal it will act if higher prices look likely to translate to higher inflation rate.
Unless CEOs and their boards are clear about their own values, and those of the companies they run, they will fall down a rabbit hole of confusion.