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Asset managers made a “huge mistake” in claiming the investment industry could “save the world”, the departing chair of the UK’s Aberdeen Group said, over-egging their role in environment, social and government issues for marketing purposes.
Sir Douglas Flint, a former HSBC chair, told a City of London conference this week that their “ridiculously extravagant claims” had opened up asset managers to legal risk.
The most grandiose claims by financiers were driven by a mindset of “we’re not really about investing money, we’re just jolly good people and we’re saving the world”, Flint said.
“Our industry then made a kind of huge mistake, it became a marketing thing, let’s tell everyone we’re saving the world, we’re saving the planet.” The overly general statements were “a feast” for US-based lawyers, he said.
The world’s largest asset managers have faced attacks on their ESG strategies since the election of President Trump in the US, where attorneys-general in a series of Republican states have accused them of colluding and unfairly excluding fossil fuel companies.
BlackRock last month sought the dismissal of a lawsuit by Texas and other Republican-led states that claimed asset managers conspired to suppress coal production by withdrawing capital.
Alongside Vanguard, BlackRock is one of the investing heavyweights to have quit the voluntary Net Zero Asset Managers initiative, where Aberdeen was also a signatory.
The group launched in 2020 had described itself as committed to “the goal of net zero greenhouse gas emissions by 2050 or sooner”. It suspended activities in January this year, one week before the Trump inauguration.
Flint also welcomed what he described as the “expunging” of acronyms that referenced ESG, as well as diversity and inclusion, “that are in every search engine for a US litigation lawyer”.
In a counterpoint, Standard Chartered chief executive Bill Winters highlighted the practice of “greenhushing” last week, telling a London Climate Action Week event that he was ashamed that he was “not anywhere near as vocal in this environment as I had been at earlier times” when it was more “politically acceptable”.
Pension funds and institutional investors with a long-term outlook have continued to encourage asset managers to focus on their fiduciary duty and financial risks posed by extreme weather events.
Activists have also pushed Aberdeen to cut its oil and gas investments, including by mocking it in a video game sent to employees which was quickly banned on company servers.
Aberdeen Investments is still “committed to helping tackle climate change”, for its clients, shareholders, and “future generations”, it says on its website.
Asset managers now framed environmental issues in a “much more rational way”, Flint said, as a choice between shorter or longer term investment strategies.
“We try and choose the companies that are making the most effective steps towards transition in the portfolios that we manage,” he added. “But it’s our clients who mandate the areas and the pace that we go at.”
Cathy Shepherd, Citi’s global head of clean energy transition for corporate banking, also told the London City Week audience that ESG investing had suffered from being seen as “a morality idea rather than a business idea”.
“I think we really need to change that . . . it needs to be about business performance.”
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