It’s “a fishing expedition just to try and flush out what some junior bankers said in an unguarded moment on an email which can become a story,” Topping said.
Lawyers are already warning clients to tone down their ESG language. In late September, the investment bank Jefferies Financial Group Inc. invited clients to a virtual event to discuss “how investors should respond to red states on ESG.” What they were told captured the new Zeitgeist.
Attendees were encouraged to tone down their ESG talk. They were also told that some of the most far-reaching bans on ESG in US states could be “enshrined at the national and the federal level,” depending on the outcome of the midterms. In late August, Florida Governor Ron DeSantis, seen as a likely presidential candidate for the 2024 race, banned state pension funds from taking ESG risks into account, and said more such steps would follow.
For fund managers, the mantra appears to have become “be careful what you say,” said Bob Smith, who runs Sage Advisory, an Austin, Texas-based firm that advises clients with combined assets exceeding $17 billion.
In a September survey by the firm of 23 exchange-traded fund managers overseeing a combined $37.5 trillion, “there was a distinct change in tone as compared to previous years’ responses,” according to Sage’s report. Fund managers that had once “waxed poetic” on their voting and engagement strategies “seemed almost restrained, with more guarded answers.”
US-domiciled ESG ETFs now appear to be drawing less money than their European equivalents, according to an analysis by Bloomberg. Sustainable European ETFs saw more than $4 billion of inflows in the past month, while US-listed ETFs saw outflows exceeding $2 billion.
Topping said “the real story” is that plenty of financial firms are still committing to reduce their emissions, even though few have managed to provide credible paths showing how they’ll live up to those promises.
Since the COP26 climate summit in Scotland last year, GFANZ has added about 100 members representing an extra $20 trillion and bringing the combined alliance to 550 members overseeing $150 trillion in total.
“We had none of that transparency and none of that rigor and none of that ambition in the public realm a year ago,” Topping said. “That is a massive mobilization of a wall of capital to do the job, which GFANZ set out to do when we launched to finance the transition to net zero.”
But it’s a tightrope act, with politics on one side and climate science on the other. And progress remains slow.
“It’s terrible. It’s glacial,” Topping said. “We’re killing people. We’re destroying the planet.”
But too much is at stake to become absolutist. “Everything is so tightly connected that as soon as you unravel one bit, you risk unravelling every other thing,” he said.
--With assistance from Lisa Pham and Frances Schwartzkopff.
This article was provided by Bloomberg News.