It’s no secret that COP27 failed to elevate the dialogue and show a unified stance on advancing climate goals. The World Economic Forum’s annual meeting at Davos, however, seems to be picking up the slack in at least one respect: ESG as an investment pillar is universally embraced by the financial services leaders.
A quick roundup of powerful voices tells the tale:
Bank of America
CEO Brian Moynihan made clear not only that ESG is for the long-term, but that the somewhat painful search for standardized reporting will continue to its fruition.
With universal standards and rules, noted Moynihan, “frankly, an investment manager, a consumer, society, others can sit there and say, here’s a line that is acceptable and you’re either above it or below it.”
“If you’re below it we shouldn’t do business with you, and if you’re above it, tell us how you’re making progress along these important things…Which, at the end of the day, will align capitalism with what society wants from it and get us going faster.”
CEO and Chairman Larry Fink has stood at the epicenter of ESG and is largely responsible for its introduction into the mainstream. He saw significant pushback in 2022, facing claims that ESG is bad for investors, bad for companies, and even bad for the climate. At Davos, Fink made clear that the ESG flows speak for themselves.
BlackRock lost $4 billion in assets under management as a result — but took in $230 billion over the course of 2022 from U.S. clients.
Fink emphasized the global recognition that, simply put, ESG matters. “If [U.S. companies] do not have a lens towards decarbonization, you’re not going to win one euro of business,” he said. And the U.S. introduction of the Inflation Reduction Act (IRA) is also a “game changer.”
New York Life
Chairman and CEO Naïm Abou-Jaoudé was not shy about the importance of ESG, penning a WEF article leading into Davos.
“For most business leaders,” he wrote, “ESG has become a top priority. This is not because of a deep-rooted ethical or moral stance as some critics of ESG like to claim, although this should always be an important consideration.
“Rather, it is because ESG risks are now one of the largest threats facing businesses, and they could have a significant impact on their long-term performance and profitability, including their ability to raise new capital.”
LEANING INTO THE CHANGES
The fascinating twist is that through history, the prevailing wisdom is always “follow the money.” Well, the money is flowing into ESG, primarily because corporations and investors must keep pace with obvious changes in the way the world works. In other words, as we noted a few weeks back: the ESG train has already left the station.
We’ve also learned throughout history that change is never easy. It requires letting go of the norms that previously defined success. If the stands taken by the world’s largest money managers are any indication, it seems like the grip is loosening in 2023.
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