Hugh Wheelan’s 12 days of Xmas: maids, dancing ladies and lord have mercy

My festive mistletoe-ESG-misnomer busters for the season.

Only two more RI reading days until we break for Christmas!
Today’s bumper Santa sack of reflections on ESG and the misnomers that are regularly trotted out about it, includes a couple of revealing vignettes from readers. Thanks to them.

On the eighth day of Xmas, my true love gave to me: Eight maids a-milking
Here is one of the great conundrums of the responsible investment world; the argument is often put forward that if an ‘issue’ is not financially material then it shouldn’t be considered as investment relevant. So how material is the issue of the eight maids a-milking? Or put another way: how financial is the issue of equality of opportunity for women in positions of senior management and company directorships? We know there is ample academic/research evidence of the financial sense in more equal company representation (on many facets of diversity, sex being the largest). We also know that this is a complex social issue and that it will take significant structural changes to achieve. It is an important intersection between desirable social outcome and (frustratingly) relatively slow moving, but critical business and financial evolution. I would argue that it is a classic, long-term, responsible investment issue. Thankfully, the eight maids will be on the board of ‘Milking inc’ soon!

On the ninth day of Christmas, my true love gave to me: Nine ladies dancing.
A ninth ESG alphabet-soup acronym has joined eight others in the dance to “standardize” ESG metrics. The GIOC (short for the Global Investor Organisations Committee) has backing from GRI, SASB, CDP, GIIN, UNEPFI, Ceres and the global alliance of SIFs. But, just as getting nine ladies dancing in synchronicity is no easy task, neither is building a common set of metrics around the hodgepodge of ESG metrics and sustainable development goals.When it comes to balancing market signals and advancing sustainability, investors of all stripes and colours must stay light on their feet and be willing to dance to the beat of their own drummer, knowing that complex ESG issues don’t fit neatly on a balance sheet or in a well-choreographed musical score.
Hat tip: Doug

On the tenth day of Christmas, my true love gave to me: ten lords a-leaping
Here is a chilly winter’s tale from an asset owner about a ‘client meeting with a fund manager with something of the lord of the manor about them:

Fund manager: “Asset owners aren’t engaged enough on ESG! We need them to step up and tell us what they want.”
Asset owner: “That’s music to our ears. We are an engaged asset owner trying to step up to the plate. Do you want to hear how we would like our assets to be managed on ESG lines?”
Fund manager: “Good for you! One question though: is what you want to do exactly the same as the approach we already have in place?”
Asset owner: “Well…there are a few things that are different, for example….”
Fund manager: Apologies, let me stop you there. If it’s not the same as what we are already doing, we can’t help you…”
Asset owner: “But I thought you said you wanted asset owners to step up?”
Fund manager: “Oh yes, we do, but you misunderstood. We can only accommodate that in a way that is the same as we do in order that you buy our ESG products.
Asset owner leaves confused…

Hat tip: A.N. Asset Owner