Blain’s Late Morning Porridge 23 May 2022 – ESG Heresy Triggers Shock and Horror – and about time!
“Life always finds a way…”
This morning: HSBC is being pilloried for comments made by its’ ESG head, but what he said is worthy of consideration. Overly emotional ESG is a distortion that may be as dangerous as climate change denial.
Perhaps the most remarkable thing about Stuart Kirk, the “global head of responsible investing” at HSBC, is that’s he a bloke with a grey beard… Kirk and his ilk are a critically endangered species in The City these days.. and about to become even more so after his inflammatory comments to an FT conference last week.…
Kirk is was an HSBC executive until being suspended for daring to suggest the whole ESG (Environment, Social and Governance) debate has become a tad over-emotional and vulnerable to distortion and hyperbole. Naturally, the ESG industry has kicked into high gear moral indignation, shocked and horrified at his comments. I will be surprised if he isn’t sued for the emotional hurt, pain, distress and damage he’s inflicted on ESG professionals.
Yet, Kirk is a smart guy – he’s the former editor of the FT’s Lex column and had responsibility at HSCB for ESG and new green product development.
Let me stress: I wasn’t there but I have watched his speech on the FT website. Its actually very interesting, thought-provoking, and well worth a listen no matter how much you might disagree with what you’ve read in the press about it.
It will make you think – and its about time we did more of that when it comes to preparing for the consequences of climate change.
Most of Kirk’s speech was pushing against overly-emotional doom-mongers, like a lady from Deloitte called Sharon. Kirk noted that when she told the audience climate change meant everyone in the room was dead, most didn’t even look up from their mobile phones. He also criticised some chap called Mark, a former central banker who is making a fairly good living jetting round the world to spread climate hyperbole. Kirk got a decent clap at the end of his 15 minute pre-coffee conference slot.
For some reason I can’t quite fathom, I tend not to get invited to ESG and sustainability conferences. It doesn’t seem to matter how many times I say I absolutely agree with the science of global warming, or environmental damage must be addressed, but apparently the BBC has me down as a climate change denier because I suggested wind-farms ain’t all they are presented to be when it comes to reliability and power to the grid.
The quotes that have appeared on Kirk’s slot have been selective and contextualised. The media has been delighted by the shocked hysterical comments from the ESG high church of woke. Having watched Kirk on the Video, I doubt he will do the usual banker-caught-with-finger-in-till thing by stepping up later today, making a cringe-worthy apology for his comments.. and resigning in shame. He will, of course, be sacked… for putting his employer at risk by daring to question the hyperbole around ESG.
Naturally, HSBC’s leadership cadre has reacted with horror and shock – even though the speech was approved 2 months ago and has been sitting (unread?) on the company website..
Although Kirks comments have proved remarkably ill-judged in terms of his career longevity.. they are worth thinking about… The most hyped quote is “who cares if Miami is six meters underwater in 100 years time”, before he explained Amsterdam copes rather well with being below sea-level. He argued that solutions will be found because mankind adapts. He then talked about “nut-jobs telling me about the end of the world.”
And that’s a critical thing. Mankind is inventive and we adapt. We cope. Coping with change is why we thrive. He was quite scathing about climate doomsters and those who have made climate change the core of lucrative careers in finance. Former BoE governor Mark Carney was quoted in a slide entitled “Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings as ALWAYS wrong.” Spot on, or as I say: “things are never as bad as you fear, but seldom as good as you hope.”
Kirk’s focus was on how we adapt. He said: “One of the tragedies of this whole debate, which we obsess about at HSBC, is that we spend way too much on mitigation and financing and not enough on adaption financing.” Spot on. Agree with him. I have written too many times in the Morning Porridge about the lack of joined up thinking; like trying to make wind farms without steel (which requires metallurgical coal), or how tidal is a much more reliable, but more expensive solution than wind.
But, what was Kirk’s crime..?
He has caused a massive problem for his employer. HSBC might make big profits and have plenty of capital, but its desperately short of banking credibility. The fact it’s being taken to the UK advertising authority for Greenwashing is revealing. Analysts have questioned its ESG culture, governance, ambition and stewardship in the wake of Kirk’s comments. Others have slammed its “fiduciary duty towards clients” if its investing in non ESG projects without a primary concern for saving them from climate change.
Blah, blah, blah..
For years I’ve been warning about ESG distortions. I absolutely believe in mitigating carbon emissions and addressing climate change – but in a clear, transparent, considered and well-thought out way. The path to transiting the global economy from Fossil Fuels to clean renewables needs to be planned and considered – not emotional.
Kirk was talking about exactly the same thing. There is a substantial danger that ESG is over-emotional. That is causing distortion. We need to focus on not only addressing climate change, but also keeping the global economy on track. The key priorities today should be market risks as stocks head into bear territory, and the looming stagflationary collapse that is coming on the back of consumer cost of living crisis.
Last week I wrote about how dismal Bank of England Governor Andrew Bailey’s appearance in Parliament was. He was acting like the institutionalised insider he is – almost joshing with this fellow members of the establishment about the consequences of stagnation on the economy and the coming food apocalypse.
Around the Financial Markets and the City of London, senior financial players are concerned about Bailey’s tone, and wonder who is advising him on recession, inflation and economic pain. Yet, its no secret The Bank’s best and brightest economists and thinkers are not working on how to boost the economy, the coming consumer and housing meltdown, but have all been put in purdah to consider “climate change”.
Climate change is real, and it could be addressed by the markets to innovate, build and launch solutions… but what we have today is hysterical ESG distortions – which are as much responsible for the West’s energy crisis as Putin!
No time for five things this morning..
Sorry for late comment. Out of time, and back to the day job!
Bill Blain
Strategist – Shard Capital
9 Comments
Comments are closed.
From a client:
You asked what was Kirk’s crime?
“The thought police would get him just the same. He had committed – would have committed, even if he had never set pen to paper – the essential crime that contained all others in itself. Thoughtcrime, they called it. Thoughtcrime was not a thing that could be concealed forever. You might dodge successfully for a while, even for years, but sooner or later they were bound to get you.”
Those in the ESG culture should look at the gospel of two great men, for their own guidance, I would venture to suggest.
Chief Seattle,
“How can you buy or sell the sky, the warmth of the land? The idea is strange to us. If we do not own the freshness of the air and the sparkle of the water, how can you buy them?
Every part of this earth is sacred to my people.
This we know: the earth does not belong to man; man belongs to the earth. All things are connected.”
Buckminster Fuller,
“I am convinced that humanity’s fitness for continuance in the cosmic scheme no longer depends on the validity of political, religious, economic or social organizations, which altogether heretofore have been assumed to represent the many; I am convinced that human continuance now depends entirely upon:
The individual wisdom of each and every individual.
The individual’s comprehension of informedness.
The individual’s integrity of speaking and acting only on the individual’s own within-self-intuited and reasoned initiative.
The individual’s joining action with others, as motivated only by the individual’s conceived consequences of so doing.
The individual’s never-joining action with others, as motivated only by crowd-engendered emotionalism, or by a sense of the crowd’s power to overwhelm, or in fear of holding to the course indicated by own’s own intellectual convictions.”
Climate change will not be the end of our species unless it provokes an all out nuclear war and then perhaps not even then. Humans do adapt. But it will be the end of a great deal of nature as we know it. Nature adapts slowly and cannot change its immediate environment (like humans can inside shelter) and therefore much of it will perish. And yes Amsterdam functions and survives below sea level but the cost to the world of protecting coastal infrastructure from a five foot sea level rise will be much higher than transitioning the worlds energy sources.
The problem is that the world must start the transition but it hasn’t due to entrenched economic and political interests. I don’t expect that it will ever start. I am an engineer and if I was the project engineer for the world’s energy transition I probably could have it done in 25 years assuming that I had the budget and the authority. The problem is that there is no authority (the world is basically leaderless) and there is no budget. Everyone is more interested in making paper progress than real progress as if you were on a submarine taking on water and you were more interested in sending damage reports to the captain that the water inside is receding than getting the water out of the sub (in fact the reports might be the opposite of what is actually occurring).
Before you start a transition you need to understand what you are transitioning to and why.
Amsterdam May be able to survive below sea level, but only because it is possible to open the sluices at low spring tides to drain the water out. But give it 20 years there will come a time when at the highest of high spring tides with the Rhine and other rivers in full flood …..!
The cost of continuing to build ever higher defences, not just in The Netherlands but Miami, & London, etc., etc. will eventually become too great, but then there seems little chance of weening the richest 10% of the worlds population off their exorbitant lifestyles.
If 100 metre long air conditioned so called yachts are allowed to cruise the Med with fuel consumptions measured in feet rather than nautical miles to the gallon, what chance of getting the ordinary middle class individual to buy a car that will do more than 40 to the gallon, never min buy an electric bicycle.
Seen from the down town streets of Mumbai, a Mercedes E Class or any equivalent must look obscene!
I believe there is no hope of ever starting to limit the global temperature rise, and therefore the resultant sea level rise, until after it will be far too late! But I for one won’t be around to see it.
Nevertheless, I try to do my bit by cycling as much as possible and admonishing drivers, including policemen, who sit in parked cars with their engines running.
Hi Bill, genuinely enjoy reading your thoughts. But do you really understand the risks from climate change because they are horribly non linear. If Miami is even 25cm underwater major rice production in Asia especially in the Mekong will have been finished. Millions upon millions of people will be on the move. If we are worried about food scarcity from Russia/ ukraine this will dwarf it. We have been good at coping and innovating against a very slow moving environmental backdrop, I don’t share your confidence this can protect us when the backdrop starts changing on a scale of decades rather than millenia. Be very interested in your thoughts. Ps ex physicist, ex banker now teacher.
Mike
Fair points. And I absolutely agree that when climate changes moves from linear progression in terms of the damage into a chaotic unpredicable phase then its going to be extremely challenged.
They say one of the reasons from the number of revolutions in Latin America is the lack of a good concept of comprimise in Spanish… ahem.. but there needs to be discusssion and pragmatism in the objectives of saving the plantet and maintaining growth. I have looked at very sensible climate change transition strategies that get to netzero by 2050 though reforetation, soil, nuclear and renewables, but have been nixed by climate wokery because they sue gas as a transition fuel. THat is daft. If we destroy the global economy and nix growth.. to save it.. we will have anarchy.
The point is that there is enormonous human capacity to adapt, solve and innovate – but only if given the opportunity. At the moment hyberbolic ESG is standing in the way sensible solution and discussion how to do Environment, Social, Goveranance and Growth – ESGG
Hi Bill, I was always a fan of nuclear fission – ofcourse there are problems with disposing of the waste and I imagine if you know any of the details of Germany’s so called Energiewaende then you can imagine my schadenfreude. They closed are closing down nuclear with a vague plan of building more land based wind turbines – good and well executed (ish) BUT continue to burn coal from the Ruhr valley because no politician was willing to shut down this socially important but economically daft and climate change destroying industry – never mind reliance on Russian gas. In the UK we have now a decent percentage of renewable generation but could have had so much more already, if the not on my land – can’t spoil my view brigade didn’t have so much political clout. These changes need a real push and maybe the hyperbole are hyperbolic but we have shown as a race that we won’t confront this unless pushed.
And what if having a capitalist economy doesn’t happen to be compatible with having a successful energy transition? Because looking at the situation with oil and gas from Russia, you could be forgiven for wondering if we have reached already peak oil and gas, and if that were the case, how come we haven’t transitioned far enough away from using oil and gas that is literally not available any more? It would seem like a capitalist economy failed to provide a successful transition, in that case, and instead of our current markets reacting appropriately to price signals, they collaborated to hide and ignore them.
I entirely agree with you that people can adapt. And I think it’s easier to adapt to a different economic system, than it is to adapt to a future with ever decreasing availability of energy for transport and other purposes because there just isn’t the supply of oil and gas, combined with ever decreasing availability of food due to the climate change that we have already caused. But we may not have the time to exercise that particular choice, because we may already have gone too far down the path of the second option.
But let’s not get emotional about it. Most people accept rather calmly a diagnosis of a deadly disease by their doctor, especially in their old age. Maybe our civilization is old, so we can accept calmly and in a dignified manner that it’s time for our civilization to go.
Alternatively, we could get real and invest in lifeboats. And if you can’t think of any that convinces you, going to any church or temple and donating to them all the money you possibly can as long as they use it for charitable causes you approve of is a traditional lifeboat that never goes out of fashion. Consider it an investment in eternity.