A Welcome Debate
Over the last several months, the clanging to end fossil fuel production in order to meet “net-zero” aspirations has been met with questions and push-back. For a period, it was easy for critics to dismiss the counterbalancing arguments because, while the questions raised were objective, they came from political actors. While state attorneys general, treasurers and comptrollers, and governors have been in the news battling over the appropriateness of ESG-driven investing in public pension funds, business leaders had kept to one side of the debate until recently.
In a February 26 Wall Street Journal opinion piece, the author described CEO Tim Buckley’s decision to withdraw from the Net Zero Asset Managers Initiative, citing attention to his firm’s fiduciary duty and the lackluster performance of ESG-driven investments compared to diversified investing. Buckley had been previously quoted in a February 20 Financial Times article as stating that “[his firm’s] research indicates that ESG investing does not have any advantage over broad-based investing.” He also noted that “[i]t would be hubris to presume [Vanguard knows] the right strategy for the thousands of companies that [it] invests in,” alluding to the trend of asset managers’ judging other private companies’ ESG strategies.
“This may be the single most important catalyst to force integrity into the definition of “green””
Bank of America CEO Bryan Moynihan has taken a different tack. A March 7 Reuters article highlighted Moynihan’s proclamation that his firm is committed to capitalism. While Bank of America is one of the largest issuers of ESG-themed bonds, the firm also had significant lending commitments to energy companies in 2022. The Reuters article described Moynihans’s approach in the firm’s annual report, which states "[w]e enable our customers to drive capitalism,” [which in turn] “ provides the money, the creativity, and the expertise to solve the needs of society.”
While the debate continues, energy market providers remain between a rock and a hard place in terms of developing their own firm strategies, and commodity investors lack reliable data and risk measurement tools. In good news, the long overdue discussion of data and performance is finally beginning. This may be the single most important catalyst to force integrity into the definition of “green” and to create a reliable foundation of data for the risk management needed in any healthy market.