Week 23: Assassination of ESG in the U.S. Why Europe Strikes Back and What Is CHO!

Dear all,

Almost every day, there are questions about ESG backlash, ESG failures, and ESG agony. Some call it a “dot-com syndrome.” Some say the “party” is over. Others simply enjoy the feeling of a burned future, for the sake of it. The historical attempt to rein in reckless, greedy, destructive, and costly behaviour of the financial industry is hanging by a thread, abandoned and discredited.

I recently met a Group Head of Sustainability for a major bank in the Nordics. Our paths had crossed in the past, but we had never had a proper sit-down. After some initial pleasantries, we dived into several topics on the state of ESG and sustainability in the world. It was like a boxing session, dancing through the rounds, discussing Scope 3 for the financial industry, the fact that externalities used to generate profit are not priced, lack of moral ground, and some other, more marginal topics like biodiversity and, God forbid, human rights. A respectful boxing session ended in a corner of a restaurant, leaving me with yet another set of questions.

The sustainable banker told me, leaning in, that ESG does not deliver performance, adding “in the short term,” and then confirmed that “short term” is the term that matters to shareholders. And as if to make it even clearer, “sustainability works only if it is profitable.” Over an espresso, a dessert of carbon credits markets, and the need for cheap energy, which, according to my lunch buddy, will only happen sometime in the next 100 years, we ended our lunch talking about tennis.

Taking a stroll back from lunch, I went through our conversation, trying to keep my thoughts focused on the topics we discussed, but one thing kept disrupting my process: the naïve or even stupid thought that people working with sustainability, let alone ESG or climate or any other associated acronym, do so for the sake of elevating the current system to something better, not only maintaining the dysfunctional system we have. Naïve it is, I agree with that.

Prior to this lunch, I spent hours trying to answer a question I received regarding the assassination of ESG in the US. Here are some of the findings from that research that might help people understand what forces made this assassination happen.