When an opinion article in the Financial Times attacks the ESG investing industry, you might imagine that the attack must come from the right, that it argues ESG is somehow undermining sound financial principles, that it’s socialism in disguise. But you’d be wrong: this attack is from the other side, arguing that ESG is not socialist enough and that government policy alone is the only way to solve the current environmental and social challenges.  

A longer version of this argument can be found in an extended essay by Tariq Fancy, former Chief Investment Officer for Sustainable Investing at Blackrock, now firmly converted to the anti-ESG camp. In short, his (and Armstrong’s) argument is that ESG investing does more harm than good because it serves as a smokescreen, distracting from the effective policy action that is urgently needed.

If the FT headline was “don’t count on ESG investing alone to get us where we need to go” or “ESG investing is no substitute for effective policy”, I could buy it. But “the ESG investment industry is dangerous”? No. This just plays in to the hands of those who want to bluster and divert and defer action – the what-about-ists who only want to find reasons not to act. 

The fact is, we need both public policy and investor action. As Mark Carney has put it: “to solve the climate crisis, we must address three challenges, engineering, political, and financial.”

Policy alone didn’t work to get to the desired ends in the Soviet Union. It won’t work here.

Effective policy is absolutely the most important part of the picture. But we need corporations, we need the investment community and we need individuals to do their part too. My former colleague Roger Urwin captured this in a neat “4-3-2-1” PIN code: which puts policy first (the “4”) but which also acknowledges that everyone has a part to play (corporations being the “3”, investors the “2” and individuals the “1”). 

Fancy and Armstrong raise legitimate concerns. The industry needs to do a better job. Best practice needs to advance, ESG needs to be more authentic, greenwashing – where it exists – needs to be called out. And if you’re looking for a litmus test of how genuine a corporation or an investment manager is, look at their actions related to corporate lobbying: if they are actively working to weaken the required policy actions, then by all means call that out. We have real work to do if we are to play our part.

But please don’t write off every investment manager as irredeemably part of the problem.