THE YEAR 2020 has already seen environmental, social and governance (ESG) investing gain some high-profile converts.
In January, the head of the world’s largest investment management firm wrote an open letter to fellow CEOs. In it, BlackRock CEO Larry Fink vowed to use his firm’s $7 trillion in assets under management – and the considerable voting power that comes with such a portfolio – to encourage sustainability and fight climate change.
Making the case that climate risk was investment risk, Fink said BlackRock would use its voice to push for greater company disclosures on sustainability. In fact, the letter included a not-so-veiled threat, saying it would be “increasingly disposed” to vote against management when disclosures are wanting or the business isn’t making progress on sustainability.
It's a big moment for ESG investing.
But two obstacles stand in the way of broad adoption: inconsistent ratings and a dearth of data.
“It’s not about more data, it’s about better data.”
- Erika Karp, Cornerstone Capital Group CEO and Founder
If you think about credit ratings – Moody’s, S&P, Fitch – their ratings are correlated almost perfectly. But if you look at the different ESG raters, the correlations around their ratings are extremely low.
The other problem is a lack of agreed-upon standards (sets of values) that investors demand from companies. If every public company disclosed reams of relevant, quality data, the inconsistency between ESG raters would shrink overnight.
Stay woke on carbon and climate. Go deep at carbon.substack.com
#climate #carbon #ESG
Join our VIP Carbon Tribe to receive our weekly newsletter!
Hi, I'm Walter, founder and editor of Carbon Creed: a blog and newsletter for people serious about tech and the low carbon economy.