There is a necessary tension between populist sentiment and risk-based regulation and I’m sensing it in the debate over making our money matter.
For Government, the investment of the £3,000 billion pre-funded to pay our pensions is critical to Britain’s credibility as a global leader in the meeting of the Paris pledge to be net-zero by 2050.
The risks of the world not meeting its targets are existential and those who take a sentimental view would by-pass any logical pathway and adopt investment strategies based on their adopted belief systems.
But simply switching to ethically led strategies is not going to work if that means damaging the business environment that generates the profits to meet the pension obligations in the first place. Bringing BP or Shell to its knees may depriving them of capital may sound a good idea until you consider the consequences of a world without BP and Shell – not least because their dividends will pay your pensions.
Living with the boss of one of Britain’s biggest pension schemes , I know that we cannot move to a net neutral position overnight and that the path to the targets that we collectively aspire to will be rocky , steep and winding. Often, wins will be achieved, not through shouting the odds but through suggesting alternatives. The coercion of companies to invest in a low carbon future can better be achieved by stewardship than disinvestment.
It was however good to talk with the CEO of Make My Money Matters yesterday and to understand how that organization is going about mobilizing sentiment to drive change. MMMM is – to my mind – about popularizing the need for the £3bn to deploy for a more sustainable planet, though in doing so it risks annoying many of the key decision makers – who are organizing for the same goals , but using the language of risk – not the words of extinction rebellion.
The risk that MMMM runs is of pedagogy that fails to connect with fiduciaries. The fiduciary principle is clear, “A fiduciary owes a singular duty of loyalty to the investor(s) he or she serves” . The duty is singular but its execution is complex and until both fiduciaries and populist organizations such as MMMM feel they are working to the same goal, then the tension between sentiment and “ethics” and a fiduciary “risk-based” approach, will rub against each other – in a bad way.
Building a bridge between the populist and fiduciary positions.
I don’t suppose that we are going to see either the populism of MMMM or the fiduciary organizations (including big Government) resolving this tension on their own. There is too much difference between the political agenda of a Guy Opperman and the populism of Richard Curtis but I do think there is someone with feet in both camps who may step forwards.
I am thinking of Mark Carney, who’s Reith Lectures so affected me over the Christmas period. His understanding of the seemingly different approaches of economic and social capital and his enormous emotional intelligence mean that he can see the risks and appeal to the populism of those driven by a purely ethical position.
While it is easy to blog about, it is much harder to hold credibility in both camps. Carney can and does enjoy the support of both Government and the populist movements such as Make My Money Matters. He is our best hope for immediate harmony and for a fully integrated approach that puts Britain at the forefront of the debate leading up to Glasgow’s conference in November.
I have to confess an “interest” here as BP is my Pension Fund sponsor and the Pension Fund has shares in Shell (though not BP…against the rules!). I worry about the headlong rush to put fossil fuel companies out of business. Firstly, they don’t just produce fossil fuels, where will our plastics come from once no crude oil or coal is being processed? (OK so that would mean no plastic to “recycle”, but….) Secondly, fossil fuels aren’t the real problem, we are! There are just too many humans for the planet to support. Yes, I know it requires a long term solution, but unless we not only deal with population growth but actually reduce the population, the planet will still not survive and, frankly, neither will the “finance” industry that we depend on for our wealth. OK it won’t bother you and I, Henry, nor our chidren nor probably our grandchildren, but it must be done. Though try telling that to Greenpeace or Extinction Rebellion! (I tried….) Indeed I read a press report recently where the writer was bemoaning the fact that one country (at least?) didn’t have enough live births to maintain its population!