Putin's war on Ukraine exposes the folly of ESG by Oliver Shah
Appeared in The Times on March 6, 2022
Gina's Thoughts
"For some time, the monomaniacal focus of certain investors on compliance with environmental, social and governance (ESG) metrics has been proving counterproductive. In some cases it has even begun to undermine the tenets of democracy, as decisions that should be made by governments are instead taken by fund managers based on external pressure from campaigners." The author cites defence and energy as the two sectors most affected by ESG as both sectors have been blacklisted by ESG investors. With current threats to national security and energy security of many European countries, most notably Germany, the author calls for current assumptions about ESG to change. Deutsche Bank, for example, has been busy "ticking the boxes on climate and governance" and has "promised to stop lending to the coal industry by 2025". The author wonders if they "will reconsider now that Berlin, panicking over the fact 60 per cent of its gas comes from Russia, is thinking about extending the lifespans of its coal-fired and nuclear power plants?" "In the tradeoff between security and virtue, Angela Merkel's government chose the latter, with terrible consequences." Canada is following along the same path although further behind in the timeline. Will Canada soon face the consequences of abandoning its oil and gas sector in the name of ESG? The author suggests switching out "ESG for CDP - common sense, decency and pragmatism. In the world of CDP, there are no highly paid advisers lecturing from the pulpit of giant fund managers. There will just be investors who engage with boards thoughtfully."