Five years ago, South Africa went into lockdown to combat Covid-19, in line with similar responses by governments around the globe. While the world has recovered to a large extent from the economic gut-punch dealt by the lockdowns, one area in which the international business community has struggled to regain its footing is in its commitment to ESG, an investment-driven approach to improving companies’ environmental impact (E), social impact (S), and governance (G).
In the years leading up to 2020, the corporate world was making significant strides in ESG adoption and reducing carbon emissions. However, with the resurgence of the anti-environmentalist movement in the US under now-President Donald Trump, ESG is being abandoned. This flies in the face of increasing evidence that climate change is fueling extreme weather events around the globe.
Dropping pretences
In an opinion piece that appeared in the Financial Mail in February, “They’re not even pretending anymore”, Tracey Davies of shareholder activist organisation Just Share is scathing in her criticism of the banking and asset management industries, saying their commitment to fighting climate change was mostly a facade and that now, under Trump, the facade is no longer necessary.
Davies writes: “Since the Paris Agreement was adopted in 2015, the world’s 60 biggest banks have committed almost US$7 trillion to the fossil fuel industry. Oil and gas companies have major expansion plans in every corner of the globe. Insurers continue to back fossil fuel projects, while making it harder for ordinary people to afford insurance against extreme weather events.”
“While the intentions of the initiators of [climate-action] alliances were no doubt noble, the commitments and pledges made under their auspices have given the financial sector immensely useful cover, creating a false perception of action which has undoubtedly harmed global prospects of tackling climate change.”
True colours
The most prominent asset manager to do an about-turn on climate change was the world’s largest, US-based BlackRock, which recently backed out of the Net Zero Asset Managers Initiative, launched in December 2020 with the goal of attaining net zero emissions in investment portfolios.
Furthermore, British activism group ShareAction’s Voting Matters Report 2024 notes an alarming drop in support by asset managers for shareholder resolutions on climate-related and social issues. In a statement on LinkedIn, it says: “In 2024, overall support for social and environmental shareholder resolutions hit a new low, with only a tiny fraction, 1.4% (4 out of 279) of the proposals we assessed, receiving majority support. The four largest asset managers in the world: BlackRock , Fidelity Investments, State Street Global Advisors and Vanguard, were the main blockers of social and environmental action.”
Is all lost?
A further statistic in the Voting Matters Report, however, suggests that, outside America, ESG has not died a death. While US asset managers assessed by the report supported 20% of ESG-related shareholder resolutions on average, falling for the second year in a row, firms in the UK and Europe supported 81% of such proposals.
In an article “Accelerating ESG integration in South Africa”, Tlamelo Ntabeni, senior manager research analyst at Sanlam Investments Multi-Manager, says South African asset managers have made significant strides in adopting ESG criteria. “According to the Alexander Forbes 2023 Manager Watch Annual Survey, 37 of 44 large South African equity managers subscribe to the Code of Responsible Investing in South Africa and 31 are signatories to the United Nations Principles for Responsible Investing. This adoption rate signifies a growing commitment to responsible investing practices,” he says.
In the wake of the Trump administration’s recent withdrawal from South Africa’s Just Energy Transition partnership, a multi-billion-dollar initiative aimed at helping emerging economies transition towards cleaner energies, Mila Vicquery, general manager of sustainability at Energy Partners, argues that economic sustainability, not politics, will be the deciding factor.
“With the narrative around ESG rapidly shifting from regulatory compliance to strategic necessity, the real question is not whether ESG is dead, but whether businesses are ready to embrace sustainability as a driver of long-term growth.
“This requires a new mindset: first, turning to face the challenges head-on, seeing the issues as the world sees them rather than solely through the lens of corporate interests. Then, developing a clear point of view on what needs to happen and how businesses can play a role in driving change,” Vicquery says.
