“Have you any idea of the pressures involved in being a pioneer of ESG investing?” the chairman of the insignificantly-sized investment company Kermitted Asset Management asked with an exaggerated sigh, when we caught up the other day to mark the new year with a drink. “Not a clue,” I admitted breezily. “Have you?” “And what exactly do you mean by that?” he asked, this time with rather more menace.
“Oh come on,” I laughed, unperturbed. “Unless I’m very much mistaken, Kermitted celebrates its second birthday towards the end of this month so in what possible universe does a two-year track record make you an ESG pioneer?” “Ah, I see the problem,” nodded the chairman. “You’ve clearly missed the memo explaining how – in this very universe – we can now all believe whatever we want to believe.
“Anyway, if track record were really so important when it comes to attracting cash from ESG investors, why would we still be seeing all these Johnny-Come-Latelies entering the game months and, in some instances – just about – years after the launch of Kermitted Asset Management?” “Really?” I raised an eyebrow. “You’re seriously taking the moral high ground over companies that started playing the game mere weeks after you did?”
“If you think the taking of the moral high ground is not a hugely significant – not to mention extremely satisfying – part of ESG, then you really haven’t been paying attention,” laughed the chairman. “What’s more, I would say that, as a company, we are completely even-handed on this point and will also, where at all possible, merrily take any moral high ground we can over the Johnny-Come-Earlies.
“Take, if you would, the recent example of Legal & General Investment Management’s shameful abdication of responsibility in the sphere of executive pay …” “Their shameful what-now?” I interrupted, instinctively looking around the pub for any lawyers who might take the chairman’s words amiss – even if I was reasonably confident that, given just a moment or two more, I could explain.
“Legal & General Investment Management’s shameful abdication of responsibility in the sphere of executive pay,” the chairman repeated unhelpfully. “Come on – don’t you read your own magazine? Portfolio Adviser reported last month how the company had decided to step back its engagement on executive pay and was telling remuneration committees to stop wasting its time seeking feedback they do not plan to implement.”
“No, no,” I assured him. “I did see that – it’s just that I apparently reached the complete opposite conclusion. I thought this showed a commendable inclination on the part of LGIM towards pragmatism – focusing on what works rather pandering to businesses that are merely interested in ticking a box. In the spirit of continually doing the same thing and expecting different results being a quick route to insanity, as Einstein never actually said.
“You could not be more wrong,” exclaimed the chairman as he recited: “Here at Kermitted, we have long argued in our core principles for executive pay that the pay executives receive should be easy and clear to communicate to all stakeholders, including employees and the public. We also expect boards to take into account wider workforce pay practices and ratios when judging the appropriateness of pay for executives.”
“Glossing over your use of the word ‘long’ there,” I sighed, “why settle for just banging your head against the wall of corporate apathy?” “Although it can be frustrating when concerns are not addressed” the chairman continued, “over the years there have also been numerous occasions where engaging with companies has led to them promising to think jolly hard about changing their ways.
“Also, never underestimate how rewarding telling people to buck up their ideas can be in its own right– and, on a not unconnected note, your sneering dismissal of box-ticking reveals an ignorance of the warm, fuzzy dopamine hit generated by what is, after all, a foundation stone of the entire ESG investment industry.” “You know, on reflection, I may well owe you an apology,” I said. “If I’m right about the growing number of investment groups that are keener on flaunting their ESG credentials than actually doing anything to bring about real change, then maybe you are a true pioneer after all.”
