“So how are you sleeping these days?” I asked the chairman of the insignificantly-sized investment company Kermitted Asset Management when we caught up last week. “Very well,” he nodded. “Though presumably your question is driven less by concern for my wellbeing than a desire to discuss the growing number of fund groups being pulled up on their understanding of the phrase ‘ESG criteria’.
“In your eagerness to take another pop at Kermitted, however, you have overlooked the fact we presently operate precisely zero funds and so, when I say I sleep like a baby, I do not mean I wake up every hour screaming.” “Of course,” I exclaimed. “You had to pull all 20 of your sustainable offerings earlier this year after the ratings agencies questioned ‘ambiguous language’ in their legal filings.”
Like to read more from Kermitted Asset Management? Really? Well … OK …
“I believe the precise wording was ‘the instigation of an internal review to ensure the highest level of service for our investors’,” the chairman corrected me. “Though I concede the end-result is largely the same.” “Talk about a silver lining,” I laughed. “The ratings mob did you a real favour – otherwise the FCA would surely have been all over you by now.”
“In their dreams,” the chairman snorted. “Anyway, I question the notion torpedoing an entire stable of funds – albeit temporarily – might count as a favour.” “And I question the notion ‘temporarily torpedoing a stable’ counts as a metaphor,” I said. “Fair enough,” the chairman nodded. “Though, speaking of fair, it’s not just fund managers who are struggling with what is and isn’t ‘ESG’, is it?
“Ask 10 different people and you’ll likely receive 10 different answers – as Portfolio Adviser neatly illustrated the other day with its story on S&P Dow Jones apparently viewing the paragon of environmentalism that is Exxon as more ESG-friendly than Tesla. At the end of the day, ESG analysts are still analysts – and analysts do love a nice, neat number over nuance.
“How did one of the piece’s talking heads describe the industry’s preferred mode of research? Oh yes: ‘Find the answer, tick the box, move on.’ You know, when Kermitted relaunches its fund range, I’m seriously tempted to use that in our marketing.” “I’d laugh if I didn’t know you were serious,” I sighed. “But don’t you despair of a world where a carbon-emitting plastics polluter can be ‘good-ESG’ and an electric car pioneer ‘bad-ESG’?”
“Given I’ve built an entire career on the greyer shades of investment definition, I may not be the best person to ask,” the chairman observed. “Still, I think I’d only start worrying if the way companies were rated allowed them to be packaged up so investors gained an entirely unwarranted sense of security about what they were buying – and that’s never happened in the entire history of financial services, has it?”
We contemplated our drinks in silence for a moment. “So if you’re now an ESG-oriented investor with no ESG-oriented funds, how are you filling your time?” I asked eventually. “I’ve pretty much got the whole team signing up to or endorsing responsible investing initiatives,” the chairman replied. “I thought it might look good post … er … internal review but you’d be amazed how many there are once you start looking.
“Obviously we notched up the biggies straight off the bat – UK Stewardship Code, Principles for Responsible Investment, Net Zero Asset Managers Initiative, Task Force on Climate-related Financial Disclosures and so on – but it turns out we’d only just begun. It may be easier if I just use abbreviations but, off the top of my head, Kermitted is now an ardent supporter of ACGA, ARE, ASISA, CDP, Cerrado, CHRB, EMIA, Eumedion …”
“You have got to be making some of those up,” I protested. “Not a one,” shrugged the chairman. “Thought about it – didn’t have to. Um … FAIRR, FBP, GFANZ, GIGN, GIIN, GIS, IAAR, ICCR, ICGN, IIF, IIGCC, III, IRJ, KTC, MCP, NBI, QCA, RIA, SASB, SAC, SMI, TAI, TPI, UKSIF, WBA and the WWF – wildlife, obviously, not wrestling. Anyway, I may’ve forgotten a few but you get the gist.” “Indeed,” I nodded. “And what do all those memberships require of you?” “Require of us?” said the chairman. “Are you implying signing-up somehow isn’t enough?”
