Earlier this week, I saw a social media post from the hard Left UK pressure group Momentum declaring they had held a political education event where ‘attendees role-played the creation of capitalism’. As one wag commented: How exactly did Eve market that apple to Adam?
While I shudder to imagine how this worshop unfolded, it did make me think: Are the Trotskyites finally coming round to the idea that capitalism isn’t going away, but could do with a bit of a shake-up?
As Lenin famously never said, “If you can’t beat them, join them.”
Thousands of miles away, I also received an invite to attend an online session about the launch of ARK Investment’s new Transparency ETF, an investment product which will put ESG risk – Environment, Social and Governance – at its heart.
These two events had more in common than perhaps at first it appeared.
Ark Investments and its superstar fund manager, Cathie Wood, took the investment community by storm in 2020 with their innovation-based outlook for investing. Picking businesses taking risks and doing amazing new things, this Tesla heavy fund returned growth of 150% for canny investors in the first year.
This year has not been so stellar, resulting in Big Short investor Michael Burry – the man who won billions betting on the 2006 financial crash – taking a similar position against Ms. Wood’s Innovation ETF.
So, the news that ARK was launching an ESG ETF was received with much interest across Wall Street, high street brokerages, day traders and those who dabble on the volatility of the stock markets.
It also made CSR or ESG watchers like me hope to see some innovation too.
ESG investments are nothing new. There are already hundreds of investment funds and indices which say they invest in companies which want to ‘do well by doing good’. How would this one differ?
Working as a public affairs analyst for a major packaged goods manufacturer in the 90’s and 2000’s, I worked with other multinationals to create the outline for Social Responsibility reporting, so investors and other interested parties could have some dependable metrics and comparisons to inform their decisions.
The focus then was typically on eliminating child labour from the complex supply chains multinational companies utilize. As climate change issues emerged, a company’s energy use, recycling and natural resource management became a key index and being a signatory to a global, national or trade association code of conduct, ethics and business norms was seen as a sign of commitment.
Specific reporting standards were introduced for Water, Emissions, Energy and other key issues and companies diligently worked to improve their reporting scorecards, picking up awards and plaudits along the way but also attracting the hundreds of billions of dollars in new Ethical Investment Funds being made available, as well as aligning more closely with consumer expectations and evolving regulatory requirements.
A bleeding-heart liberal and unabashedly pro-business I may be, but I’m not naïve enough to say that Big Corporate’s only intentions in all this was to ‘do good’ or create a ‘more just and sustainable world’ – though I openly admit I wrote those phrases into chairman’s shareholder letters, presentations and depositions, and numerous press releases and marketing blurbs on more than one occasion.
Accusations of ‘greenwashing’ are nothing new, but it’s a shame the business world hasn’t been able to better convince others their intentions are much closer to the expectations of society as whole than it appears at first glance.
If I’m honest, I’m also a little disappointed that despite the best efforts of the enormous number of colleagues past and present working in the arena of Corporate Social Responsibility, Sustainability and ESG, the future of the planet and its various occupants seems less secure than it did two decades ago.
But let’s not give up hope.
I remember being introduced to a team of analysts and sector researchers by the CFO and COO of my organisation as the ‘in-house activist’. It was a badge I wore with honour and I saw it as my role to bring the latest insights from the rapidly evolving Sustainability and CSR movement into the decision-making processes of the business.
While bringing forward the views of shareholders, consumers, supply chain partners, regulators and trade analysts was front and centre of my role, I did not see it as my responsibility to amplify the voices of those shrill industry and business critics, who frankly, no matter what the business committed to deliver, would always cast it as the villain, longing for it to be wound up or fail.
Sadly, I imagine the Momentum role play was just such an affair.
Probably the poor sap who was chosen to role play the CEO of Mega Corp would have portrayed him – because it will have been a ‘he’ – as soulless, profit-only motivated, and with a flagrant disregard for the rights of individuals or communities. Probably – knowing the hard Left’s problems with anti-Semitism – he would have been a gross Shylock-type caricature too, running either a ‘death at the loom’ sweat shop or a modern-day Dickensian warehouse fulfilment centre, I’m sure.
Make no mistake, the business community has missed more than a few open goals when it comes to leading and shaping the ESG landscape. But their mission has been frustrated by the challenges of remaining competitive while enforcing voluntary standards and norms, the fact that individual poor decision-making or malpractice can undermine the entire organizations efforts at a stroke and, in large part, because consumers – comfortable living in a $1.99 for a tee-shirt or 99 cents for a hamburger economy – just won’t pay the premium which responsibility demands.
Somewhere between the painless, emollient of current corporate CSR or ESG programs and the doom and gloom, mortification and penance of Momentum’s hair shirt must be a true opportunity, surely?
In the early days of CSR, we spoke about ‘license to operate’ and I think the concept is still valid today. Businesses already understand that not meeting customer expectations is their death knell – look no further than the British automobile industry for an example.
Not being compliant with emerging regulatory frameworks is also an enormous risk, not only because of the monetary penalties which can be imposed but the loss of trust from customers, employees and communities. And perhaps most tellingly, businesses fail when they find their product becomes obsolete because it simply no longer meets the wishes of consumers – I remember we used to get coal delivered to the house when I was youngster, for example.
So, what of these two competing events? Somewhere between the fringe cries of ‘shut them down’ and ‘the only business of business is business’, lie real opportunities to make a difference.
I’d love to see moderate voices on the Left and in trade unions join with business to shape the behaviours and expectations of business, employers and supply chains.
As much as I can dream that someone at Momentum’s event stood up and said the obvious truism that ‘not all business is bad’, I doubt anyone was brave enough.
I would have also loved for one of the speakers at the ARK Transparency launch to say their fund was going to focus on shaping the future too. But they didn’t.
Sadly, it appears this fund, unlike ARK’s mega successful Innovation ETF which shook the investment world, is just going to be another one made up of the big beasts with already long-established CSR and ESG programs – like Walmart, Nike, Amazon, Microsoft and Tesla. These are good companies, but it is a huge mistake to exclude those working in the much more difficult to navigate sectors.
A truly progressive fund would admit not exclude those firms in the energy, chemicals, extractive industries, tobacco, gambling and alcohol sectors, where – frankly – miniscule improvements in policy and practice can have profound effects on the lives of millions. In these sectors some of the best work to deliver a more sustainable planet and more just society is really taking place.
If we want to generate genuine momentum in ESG, this would be the brave place to start.
Martin Liptrot is a writer and commentator on public affairs and politics based in Florida.