Harbour ponders drivers of ESG pull back

Finding the balance between disclosure and modesty is key to avoiding getting caught up in the ESG backlash and maintaining clients’ trust, according to Harbour Asset Management’s responsible investment team.

With global companies and investment managers publicly walking away from their emissions targets and climate action group memberships, the local manager says it is still seeing strong inflows into its own responsible investment-specific fund, although evidence on returns for labelled funds remains mixed. 

“We know we've got work to do to ensure that the ESG principles we're layering into this value, the risk that we’re taking continues to deliver for clients,” says Harbour Co-CEO and CIO Andrew Bascand, presenting at the firm’s responsible investment forum in Wellington.

Lack of trust is one of the drivers of the ESG pull back, says Bascand, and colleague Jorge Waayman, ESG research manager, says transparency, providing examples of case studies, obtaining external certification and having good controls in place are answers to some of the greenwashing worries investment managers are dealing with.

“We know we've got work to do to ensure that the ESG principles we're layering into this value, the risk that we’re taking continues to deliver for clients.”

When it comes to another undesirable label, “greenhushing”, managers and companies point to direct liability settings as the reason for taking a risk averse approach to disclosure, says Waayman.

“You want to make sure you still have the capability to talk about areas where you're progressing in, or perhaps you're looking to fill in in the future.

“I think that requires some humility and not letting perfect get in the way of good, and that just really comes back to having the right regulatory settings as well.”

Jorge Waayman says companies in New Zealand and Australia do not seem to have abandoned their ESG principles. 

“I think we're starting to see some of them backing away from some of the hard targets that might have been overly ambitious and just taking more of a pragmatic approach instead.”

How deep does the ESG pull back go?

A combination of anti-ESG rhetoric, lack of trust and a focus on shifting policy settings in the US are feeding the perception ESG priorities are taking a backseat, according to Co-CEO Andrew Bascand.

“The anti-ESG guys are concerned that we're just talking really about something that can lead us to sell our products better, sell our services better, and make it appear that our little shiny thing over here is sort of painted that lovely color green, and that's where this ‘green wishing’ comes from.

“This new term is sort of taking over from ‘green washing’ and is about setting these unattainable targets, targets that we probably need, because we need to be aspirational.”

Media headlines about big global names like Wells Fargo, Black Rock and the likes of PepsiCo pulling back on their climate commitments have also added to the feeling ESG values are no longer the flavour of the day, he says.