If Money Talks, It’s Time to Shout

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“The Larry Fink letter”. How many times this year have we heard this cited as proof that investors now take sustainability seriously?

The letter highlights the BlackRock Chairman and CEO’s expectations of companies and asks them to explain how their business makes “a positive contribution to society” beyond financial performance. But has its publication led analysts to ask different questions about corporate purpose, climate change, diversity or executive pay on quarterly earnings calls and at annual meetings?

After five recent conversations with CEOs, I would say no. Each one was, naturally, well aware of “the letter” but not one had noticed a shift in what analysts want to talk about. Some would say that companies get the questions they deserve – in other words if companies don’t talk about sustainability attributes they can’t complain if they are not asked. But there does appear to be a gap between investor rhetoric and reality.

That said, this year I have seen more activity in the finance space than in the last ten years. No doubt the UNEP Inquiry into the Design of a Sustainable Financial system has helped stimulate this. To name but a few examples, the Embankment Project (now brilliantly titled EPIC) has now reported on measuring long term value creation. Amundi – Europe’s largest asset management firm – has launched a 2021 Action Plan including a pledge to fully ESG screen 100% of investments by 2021. And the work of the EU’s High Level Expert Group on Sustainable Finance has been moving apace.

There is clearly more ambition to take ESG factors into account in investment, as well as increased attention on the more nascent impact investing.

There is clearly more ambition to take ESG factors into account in investment, as well as increased attention on the more nascent impact investing – a more ambitious approach that focuses on companies whose product or service is solving a sustainability challenge or projects where the positive impact can be quantified and measured. And studies showing the rise in interest in ESG are plentiful.

But a recent Schroders survey found a third of investors polled do not invest sustainably, and it has little or no influence on their decisions. As Matt Christiansen, Global Head of Responsible Investment at AXA IM puts it “There is great inertia in money – so many different decisions are need to get to a new investment strategy, and there are many gate keepers, from pension fund consultants, investment advisors, to trustees”.

I believe to overcome this inertia we need a shift in asset management culture, an increase in shareholder activism and a stronger move beyond SRI and ESG towards theme-based investing.


I can remember a time not so long ago when company CEOs would give speeches filled with platitudes on how corporate responsibility was in their company’s DNA and describe a company that, in truth, bore little resemblance to reality. 

For reasons too many and complex to explore here, the culture of many companies has caught up with the rhetoric of their leaders. Business now has a deeper understanding of the need to incorporate environmental and social risks and opportunities into decision-making and action, frequently drawing on the insights of external stakeholders to help the business make progress.

We don’t have 20 years to wait for the culture to change in asset management firms.

We don’t have 20 years to wait for the culture to change in asset management firms. We know some, including BlackRock, are investing heavily in training its analysts. But as Matt Christiansen’s point about the immense inertia in the investment world highlights that nothing short of a full-scale effort on culture change in the investment community is needed. And activism can help.


Many mainstream asset management firms are founded on the principle of passive ownership and have made a virtue of this approach – letting companies get on with business. This, of course, can be helpful in taking a long-term view. But at a such a critical point – especially in terms of climate and the Paris agreement – passivity is arguably the last thing we need. Instead, we need more in the way of activism from the long termists!

Our work with the Luc Hoffman Institute shows the potential for stakeholders, with an interest in the long-term, to actively use the influence of their shareholding to safeguard against sustainability risks and maximise opportunities. The work of ShareAction and Farm Animal Investment Risk and Return (FAIRR) point to the role that activism can play in accelerating the transition to a more sustainable economy.

Another potential area for activism is how citizens – the true owners of capital – assert themselves. New platforms are emerging, as are tools that show real impact. WHEB Asset Management has one such tool. Wheb’s Head of Research and SustainAbility Council Member Seb Beloe, says “we need to shorten the distance between people and their investments”.

Heis optimistic that “the next generation of investors will be much more focused on where their money is going, and new platforms will help them to see this”.

Themes (not screens)

One of the notable points in Amundi’s action plan is its commitment to increase its thematic funds focused on issues such as ageing, food, lifestyle and disruption strategies. These are the trends that are shaping societal changes. Its recently launched education fund recognises not only the potential growth in the market (annual market expenditure is expected to increase to $10 trillion in 2030), but the societal benefit with education as one of the main ways to prevent the further widening of social inequality. The power of this approach lies in the acceleration of capital flows towards the Sustainable Development Goals.

The power of this approach lies in the acceleration of capital flows towards the Sustainable Development Goals.

AXA IM is taking a similar approach and sees the next phase of growth with investors looking through the lens of the SDGs, with a particular focus on human capital, climate change and health.

This approach addresses some of the apprehension around the impact of ESG that Seb Beloe highlights: ‘My concern with the emergence of ‘ESG’ is that it only really means what people choose it to mean. And even at its best, it focuses on how a company operates not what it does. For many key sectors the critical issue is the performance of their products and services – that’s where their true impact lies”.

As Julian Kölbel at the Centre for Sustainable Finance and Private Wealth observes: the growth of sustainable investing is good news only if it actually makes a difference.  Whilst it is important to celebrate the ambition of investors such as BlackRock, we can’t be blinded by it. We must continue to shout about the need to close the gap between talk of sustainability risks and investor action. And we must close it quickly given that finance is possibly the most powerful lever we have to accelerate the transition to a low-carbon economy.

As this edition of RADAR shows, there is an awakening in finance and investment. The task at hand is to build on these gains and accelerate progress, even against all the competing pressures. With a real effort at culture change, more activism and a shift in focus the 2030 agenda is possible.

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