Week 1: What is our story? What is your story?

In this issue: ▸ The story of our time… ▸ Corporate ‘integrated’ reporting… ▸ Largest asset managers = highest carbon footprint ▸ And much more...

Dear All, 

What is your story?

A dear friend, one of the best documentary filmmakers in the world, posted that question recently on several social media channels. He told me that the response has been overwhelming.

Everyone has a story, and everyone carries that story, sometimes without even knowing what that story is. Getting to know your story might take a lifetime. Some people find it early on and follow their stories throughout their life, shaping, rephrasing, nursing, cajoling, and even burning their stories.

You can see that peculiar light in their eyes when they walk down the street, their story sitting on the shoulder, walking along. They know. They can feel it deep down. It is part of the fabric of who they are.

You can never run away from your story. You think you can. But no way. Some think it is just some superficial, irrational bullocks diverging focus from the “real life”. Yet, books and films, news and social media, all of it is built on the presumption of storytelling, directed towards us and from us to others. See me, hear me, confirm me. I was here, I have made my mark on this planet.

Before us there were stories, told over centuries, repeated, forged, manipulated, glorified, true and false, and it is also stories that we tell each other, our children, friends and colleagues. After us there will be stories too.

But what is the story of our time? What do we want to tell? As a civilisation?

The story of our time…

We got here and we got stuck, with ourselves, like many times before, we burned bridges, we did not learn anything from previous mistakes, we walked into the avalanche with a glass of champagne and a smile on our faces.

We overexploited, misused, destroyed what was given to all of us, in the name of compromise we constructed. Beware of the economy! The one that dies the richest wins!

I read a story on page 8 in the Japan Times, the day before number 2022 was kicked out and down the road to welcome a new number in a row of endless numbers. Page 8 said: A million species on the brink. Human activity could lead to collapse of ecosystems. Page 8. A million species, collapse, ecosystems, humans. Hmm, maybe that is too alarmist? So let’s call it 300,000 species. Feels better? Ok, scientists always “exaggerate” so we take it down to 100,000. How does it feel now? Better?

What is the story we want to tell here? It is ok, page 8, it is fine. First page was all about new spending on defence and need for more money. Who cares. These species don’t pay my bills, or get food on the table, maybe in the future that will happen, but not now. Certainly not now. Soon kids will do “meta safaris”, and learn all about other species, while a friendly AI voice explains that they of course cannot go out and find these since the planet as such is dead.

Our story. What is it? Where do we find even the linguistic construction that can help us with this? We need a new story badly. 

Corporate ‘integrated’ reporting…

One area that has been very resourceful and has gone to great lengths to develop new linguistic content with no inner meaning is the corporate reporting area. Integrated. What a word! You get that cosy feeling. Being part of the other part. Hanging together. Being something for that other part.

Recently, I read so many corporate reports, sorry, integrated reports and I found this rather entertaining. I read some very grandiose statements of how company X now published its 2nd or 3rd integrated report and in the foreword by the CEO two mandatory sentences about “how important” ESG is and what it means for clients, suppliers and clients. Yeah. But then you scroll down to the financial statement and the balance sheet. Well. Integrated it is not.

You read about the planned growth of the company within segment Z but you cannot understand what that means for the climate targets the company has, or the sustainability risks this expected growth will create. You read about ROI numbers but cannot get any sense of how these numbers fit with the company’s ability to shift its business model. How big is the financial value at risk in relation to the climate damage the company creates through its supply chain? How sustainable are the products the company sells? Yes, I can read about the overall climate trajectory plan and commitments this and that, but what does it mean on a product and service level? How big a part of the products and services that generate revenue for shareholders are sustainable and what does that definition look like? Compared to what? 

Well, integrated reporting means that ESG data – or some of it – is inserted somewhere in the same report, in the back of it, and in most of the cases has no connection to the real business the company runs. It is separated. Just like the economic system we live in is separated from the externalities that make it work.

Yes, we do have a biodiversity game now. I read somewhere that it is a huge investment opportunity! After we destroy most of it we see it as an investment opportunity, to preserve it. Absurd. But that is our story. Just like “integrated” is a story. It is not integrated, but it sounds good. Indeed.

You should also make sure to read the assurance statements made by various consultancies at the back of these reports. They are actually rather boring, but they do tell a hell of a story. Only certain parts of the integrated reports can, currently, be the subject of an assurance engagement. These are typically those parts of the reports that include only factual disclosures with little or no evaluation by management (or forward-looking information). Information that is abstract, interpretative, predictive or qualitative is too subjective to be the subject of a limited or reasonable assurance engagement. A story it is. 

Largest asset managers = highest carbon footprint

Now onto the story of the ESG “backlash”. The past year has been bruising for many devotees of “sustainable” fund investing despite the growing attraction of products aligned with ESG criteria.

Morningstar estimates that sustainable funds attracted $22.5bn of net new money globally in the third quarter of 2022. That was less than the $33.9bn of inflows in the second quarter, but against a backdrop of significant market challenges, sustainable funds held up better than the broader market which experienced net outflows of $198bn over Q3.

At the same time, for example, MSCI, the data and index provider, found in a recent study of Scope 1 and Scope 2 emissions, produced directly by companies or as a result of their activities, that the largest asset managers have the highest carbon footprint per $1mn invested. So think about that one when you invest! 

This is old lady Europe! 

And this (see below) is Hollywood in celebrity US, and Hollywood is lagging behind. The $8.4 trillion represents 12.6 percent, or one in eight dollars, of the $66.6 trillion in total US assets under professional management.

This is bad. For each sustainable dollar, 8 are invested in completely different directions. Biodiversity pledges or not. 

What is your story?

Have a great what-is-your-story week! 

Best regards,
Sasja