I’ve read a lots about ESG over the past few months and particularly the last couple of weeks. The general theme is gloomy. We don’t get that ESG is making a difference and we are wondering whether the whole thing is a marketing con , to help failing fund managers back on their feet.
This of course belies the fact that most people care a lot about making a personal difference through their actions. Most people get very angry if they feel that resources they have committed are wasted by others. We put out separate bins for food , recyclables and non-recyclables. Our local dust-people has taken to throwing all three bins into the greedy maw of the dustcart. This has evoked outrage amongst me and my neighbours.
It’s the danger facing “green funds”. Unless they can convince us that our “future world” and “fossil free” funds are creating a net advantage then we will baulk at paying higher fees or assume we are taking higher risk or moan that we are getting lower returns, and we will be right to do so.
The funds we invest in need to start telling better stories – they need to sustain the momentum of our enthusiasm about “making my money matter” , by showing that it has.
This is what TCFD is about. But TCFD is a set of initials that’s even harder to remember than ESG. I profess to having had to look at google to remember it stands for the “taskforce on climate-related financial disclosures” – itself a narrative of kinds.
Telling the story of what happened in that mad rush to paint the town green , that has been a feature of financial management over the past ten years, should now be something we all can do. Surely that is the point of TCFD?
Yet I worry that I still don’t properly understand what counts for good and that my money, like my rubbish, is going into one big hopper and getting mixed up as if my good intentions didn’t matter.
If TCFD means anything, it should mean that we find out if the job we’re asking others to do for us is being done well or badly, and the difficult second album should tell that story. But as we know, from our record collections, most of the second albums struggle to fulfil the promise of the first and the bands that go on – are the ones that find purpose over time – despite the second record.
I expect to see many fund managers turn away from ESG in 2024 , arguing that its constituent elements, “environmental sustainability“, “social purpose” and “good governance” are so enshrined in their analytic processes that TCFD is not necessary. We should be very wary of this.
In my experience, the reporting of what you do , makes a hell of a difference of how you do things. And it is critical that what is reported is what happened – which makes auditing of TCFD important. But there is a third element to TCFD which is less thought of, but could be its making, the way the story is told.
I don’t want to get too Quietroom about this, but a compelling narrative about how our money is managed , counts for a lot. The second album may be dull and uninspiring, but it can be followed by something as great as “London Calling” was (the Clash’s great third album). The third album should be about telling the story better.
We have to accept that the current ebb of ESG is low, I suspect the consensus on ESG being good to break in 2024 as those organisations that see little commercial advantage in being on the right side of the line, trash ESG as “philanthropy” or some such other dirty word.
But we still put our trash in different containers and we complain to our council about our rubbish collectors. I hope that as financial consumers, we will do the same – demanding a better third album, or the band split up!
