Question: What do Barbie, artificial intelligence and ESG have in common (aside from their current ubiquity)?
Answer: They're all boomers, born in the 1950s.
Parking Barbie to one side for now (although the movie certainly has a lot to say about Sustainable Development Goal 5 - gender equality), let's focus on AI and ESG.
A less tangible aspect the two have in common is their rate of progress. Or more pointedly, misconceptions about how fast they are progressing. AI first became part of the lexicon in the 1950s, but while the person on the street might be forgiven for assuming progress has been linear since the phrase was coined in 1956, in actuality there was very little progress in the field until a mere 20 years ago (Mo Gawdat, Scary Smart).
Like computer science, Socially Responsible Investing (SRI) - the forerunner to ESG - rose to prominence in the 1950s when investors began to shun so-called ‘sin' stocks. But it wasn't until the early noughties that SRI took a foothold in funds, further propelled by the launch of the United Nations Principles for Responsible Investment in 2006. ESG has seen a meteoric rise up firms' agendas in recent years. Less clear is what happens next. We're seeing localised backlashes against ESG alongside a broader evolution, as I touched on earlier this month.
Our panellist James Corah, head of sustainability at CCLA Investment Management, questions the future of ESG in his latest column, namely, he asserts, because ESG is seemingly not delivering the impact people want. "People look to ESG (or sustainable) investing to deliver positive change, and its record of doing this is mixed, at best," he said. "Instead of building a better world, it has focused on the portfolio, themes, and metrics. This must change if ESG is to become something meaningful."
The industry is also reviewing its ESG budgets. HSBC's latest ESG Sentiment Survey asked asset managers where they intend to invest and what areas of ESG they plan to develop over the next 12 months. The answers were similar to last year's, but the biggest difference was the proportion of respondents hiring ESG specialists, down to 6% from 13%. Indeed, recruitment firm Farrell Associates noted that some senior ESG staff have recently been made redundant by large asset managers while the heads of ESG still in situ are having to navigate their roles with dwindling resources. This may not sit well with more sustainably minded fund selectors, who are casting a reproving eye over asset managers' approaches to ESG, as another of our panellists points out in his latest article.
Square Mile's senior investment consultant, Jake Moeller, said: "We ‘fund gatekeepers' are now evaluating ESG capabilities and responsible investing claims with a considerably critical eye. It's hard for example, to sell us your expertise in ESG capabilities when you've made almost all your ESG specialists redundant."
Moeller also suggests ESG investing is coming of age. Surely then, it is down to those who have nurtured ESG through its formative years to guide it as it matures. Thematic funds are replacing more general ESG funds; ESG is being incorporated into broader investment analysis and the differentiators between sustainable investing and mainstream investing are disappearing.
At Sustainable Investment we have been watching this maturation closely and we have taken the view that our offering needs to reflect this, with content best served on our sister sites (investmentweek.co.uk, professionalpensions.com and professionaladviser.com) and targeted to their individual audiences.
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