Aberdeen chair regrets getting sued by anti-ESG Republicans

Kenza Bryan and Emma Dunkley, reporting for the Financial Times:

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.

You can tell two stories about the rise and fall of ESG investing.

Story one:

1. ESG investors tell fossil fuel companies to reduce their emissions by cutting production.
2. It worked.
3. ESG investors were sued by climate-hostile Republicans for telling fossil fuel companies to cut production.

Story two:

1. ESG investors tell fossil fuel companies to reduce their emissions by cutting production.
2. It didn’t work.
3. But ESG investors pretended that it worked in order to attract client money.
4. They still ended up getting sued by climate-hostile Republicans.
5. To get rid of the lawsuits, they now have to tell judges that ESG doesn’t work.

Story one is how it was supposed to play out, but story two is how it actually played out. You can see why Aberdeen thinks it was a mistake to claim that ESG worked.