The ESG movement suffers a further blow as another important player voices criticism about net zero alliances. Will Swiss banks soon be alone in their sustainability commitments?
When it comes to ESG investing, the industry cannot agree on who should make the rules and how far financial institutions should go in pushing companies to become greener. It raises the question of whether it is even their decision to make.
The dilemma is brought to the fore by Vanguard CEO Tim Buckley in a «Financial Times» article (behind paywall) explaining why the world’s second-largest investment company stepped out of the Net Zero Asset Manager Alliance in December.
For Buckley, it is up to politicians and regulators to write the ESG rulebook. Financial players like Vanguard should focus on making sure the companies apply these rules and steer clear of «dictating» the strategies of the companies they invest in, he said in the interview.
Ubiquitous Criticism
Financial institutions which joined the industry’s net zero alliances are increasingly being caught in the crosshairs with critique hailing from all angles, including activist investors, governors of oil-rich US states, and the general public.
Blackrock CEO Larry Fink experienced this as he found himself fighting both claims of Blackrock’s «apparent hypocrisy» in its use of environmental, social, and governance investment commitments as well as criticism from Texas officials accusing the investment company of breaching antitrust laws and misusing shareholder voting rights to promote liberal social objectives.
Swiss Financial Center
What does the debate mean for Switzerland, keen to promote net zero alliance membership at home and whose government lists sustainable finance as a driver of its financial industry on its website?
The backlash against the alliances has done little to dissuade the Swiss Bankers Association (SBA).
The industry group told finews.com net-zero alliances are «in the process of becoming the gold standard in transparency on the climate sustainability of financial flows under the Paris Climate Agreement,» and are a way for institutions to show «a high commitment on a strategic and operational level,» to reaching the Paris climate goals.
Growing Pains
In a previous finews.com interview, the head of Swiss Sustainable Finance Sabine Doebeli said that both growing criticism around ESG investments and the regulatory environment for banks and asset managers offering sustainable investments becoming more complicated, were signs of a «niche market becoming mainstream.»
Speaking on behalf of Switzerland’s State Secretariat for International Finance last November, Christoph Baumann told finews.com that net zero alliances were for «ambitious players» and that climate goals shouldn’t be watered down «just to ensure universal membership.»
Perhaps the moment has arrived for Switzerland to prove itself as the leader it sees itself as and facilitate negotiation among the conflicting sides in the sustainable finance debate.
Updates with statement from the Swiss Bankers Association - Feb 22.
