A new list of the ‘Top 5’ ESG performers, which includes tobacco, big pharma and a mining giant, has divided market opinion.
The list was published last week by UK-based financial services firm Hargreaves Lansdown, and is based on data from Refinitiv – a subsidiary of the London Stock Exchange Group. It focuses on constituents of the FTSE100, and identifies British American Tobacco, Glencore, AstraZeneca, GlaxoSmithKline and the Coca-Cola Hellenic Bottling Company as the most highly-rated companies on environmental, social and governance factors.
Hargreaves Lansdown, which manages more than £120bn of retail investment, told RI that the list was taken straight from Refinitiv and was not the result of any further analysis.
‘ESG as a filter is a nonsense if British American Tobacco and Glencore are the 3rd and 4th highest scoring ESG stocks in the FTSE100’ – Duncan Grierson, Clim8
But the findings have attracted backlash on social media, with Duncan Grierson, CEO and Founder of green investment platform Clim8 Invest branding them a “joke”.
“ESG as a filter is a nonsense if British American Tobacco and Glencore are the 3rd and 4th highest scoring ESG stocks in the FTSE100. What about the massive negative health and environmental impacts of the products they sell??” he wrote.
Hargreaves Lansdown’s Equity Analyst, Sophie Lund-Yates, who authored the article, acknowledged in it that some of the constituents of the list might “surprise you”, but added that “it just goes to show that those wanting to invest with ESG in mind, don’t necessarily have to exclude any one type of investment”.
AstraZeneca and GlaxoSmithKline are ranked first and second in the list, respectively, followed by British American Tobacco, Glencore and Coca-Cola Hellenic Bottling Company. The latter is a Swiss-based company that produces plastic bottles for Coca Cola.
Lund-Yates also wrote that “companies in less traditionally ethical sectors can have strong ESG credentials”, pointing to British American Tobacco’s environmental focus and efforts on human rights in its supply chains.
‘ESG is a risk management approach… It is NOT about values, environmental or health impact’ – Francesco Curto, DWS Group
Dr Bronwyn King, CEO and founder of campaign group Tobacco Free Portfolios, was one of hundreds to wade into the debate on LinkedIn, describing ESG rankings as too easy to “game” and calling for a “baseline standard for companies included in products labelled ‘ESG’ or ‘sustainable’ and ‘best of sector’ methodologies must be rejected when determining eligibility criteria”.
The inclusion of Glencore in fourth place was called “ludicrous” by Dylan Tanner, Executive Director at NGO InfluenceMap. He accused the miner of being “obstructive” when it came to global climate policy developments, and said he believed it “should not be anywhere near an ESG leader list or fund”. Last month, Glencore agreed to allow shareholders an advisory vote on its climate plan.
But others in the market said the backlash highlighted the need to distinguish between ESG and sustainability.
“ESG is a risk management approach. It is about integrating ESG risks and opportunities in the investment process. It is NOT about values, environmental or health impact nor about paying the level of tax that should be paid,” said Francesco Curto, Global Head of Research at DWS Group. “That ESG is used as an indication of doing something good is a real problem. We should start using ESG for risk management (outside-in) and ‘Impact’ (inside-out) to make the difference clear”.
Iain Richards, Head of Responsible Investments at Columbia Threadneedle, echoed Curto, saying: “People use the term ESG to mean different things. It’s a different focus to sustainability. All terms can’t mean everything. The point of using them differently is so that each has a focus and purpose. Is the focus internal/external. Is it risk based or solutions based.”
Refinitiv declined to comment.