September 27, 2022

Unitranche

Supportive Business Potential

HSBC exec suspended for ESG comments brought ‘dose of honesty’ to debate, ex-BlackRock sustainable investing chief says

HSBC Asset Management responsible investing head Stuart Kirk caused an uproar when he branded climate warnings from environmental “nut jobs” as false, leading to a public rebuke from the CEO and a suspension from his job.

But Tariq Fancy, who was BlackRock’s sustainable investing CIO between 2018 and 2019, told Financial News that while Kirk’s remarks were controversial, he has “done us a service” by “infusing a dose of honesty into a debate that is otherwise leading us nowhere”.

“[Kirk’s] comments won’t be appreciated by bank executives, who view this as a sacrilegious divergence from the virtue signalling official party line, nor by many climate activists who mistakenly believe that this is the way to address climate change,” Fancy told FN.

Kirk has been suspended pending an investigation into the remarks he made at a Financial Times Moral Money conference last week.

The furore speaks to the controversy surrounding multi-trillion dollar green-finance market, where murky definitions as to what counts as good for a company’s environmental, social and governance scores has caused confusion, inconsistencies and what Fancy calls a growing backlash.

ESG exploded in popularity during the pandemic, with sustainable investment funds managing around $2.8tn of assets, according to Morningstar.

Russia’s war in Ukraine has been a stumbling block for the nascent industry, which was already under pressure following regulatory concerns around greenwashing.

During his speech entitled “Why investors need not worry about climate risk”, Kirk criticised central bankers and policymakers for overstating climate risks by trying to “out-hyperbole the next guy”, and claimed “there’s always some nut job telling me about the end of the world”.

“Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong,” one of Kirk’s presentation slides read.

Kirk said despite other financial pressures, including inflation and rising interest rates, he was being asked to spend time “looking at something that’s going to happen in 20 or 30 years”.

“The proportionality is completely out of whack,” he said.

READ HSBC exec suspended after remarking, ‘Who cares if Miami is six metres underwater in 100 years?’

Kirk’s suspension was first reported by the FT, which added that his presentation’s theme and content had been agreed internally before the conference, citing people with knowledge of the event’s planning.

Fancy said Kirk’s comments should spark a debate about how climate risks can be tackled more effectively.

“Addressing climate risks in portfolios is not the same as fighting climate change,” said Fancy, who has previously likened the booming sustainable investment sector to “selling the public a wheatgrass placebo as a solution to the onset of cancer”.

“The current conversation wrongly assumes implicitly that fighting climate risks is somehow about fighting climate change,” Fancy said. “Even climate activists, who presumably don’t normally care about financial risks in portfolios, are focused on this despite no evidence it’s in any way helpful, and a growing view that it is a distraction.”

Fancy said he did not agree with all of Kirk’s remarks, but added the HSBC executive was right when he said the impact of climate risks on portfolios is generally exaggerated.

“Notably, this is not saying that climate change is not real, or that it is not important, or that we shouldn’t be doing anything about it,” said Fancy.

“It’s a simple and honest reflection of the fact that slow-moving crises that will hit in decades may have adverse long-term economic impacts, but that doesn’t mean that they are relevant across an investor’s portfolio — especially given that most strategies are far shorter term in outlook.”

Like Kirk, Fancy questioned whether central bankers were “doing us a favour” talking up climate risks and their impact on investment portfolios.

“Rather than shouting from the rooftops that they’re doing everything they can and more to address climate risks in portfolios, which is effectively a portfolio adaptation strategy, they could instead be honest about their limitations,” said Fancy.

READ BlackRock’s Fink ‘ducking the fight’ over ESG, claims former exec

“Better to be honest about the debate we need to have, even if it means unelected central bankers can’t play heroes,” said Fancy. “Actually addressing climate change, rather than adapting portfolios to cope with it, requires top-down regulation from elected governments to actually lower real-world emissions, and the sooner we reach that conclusion the better.”

Kirk’s comments have drawn criticism from senior HSBC figures including the bank’s CEO Noel Quinn.

In a 21 May LinkedIn post, Quinn said: “I do not agree – at all – with the remarks made at last week’s FT Moral Money summit.

“They are inconsistent with HSBC’s strategy and do not reflect the views of the senior leadership of HSBC or HSBC Asset Management. Our ambition is to be the leading bank supporting the global economy in the transition to net zero.”

Meanwhile, Celine Herweijer, group chief sustainability officer at HSBC, also took to LinkedIn to express her opposition to the comments.

“It’s important to be crystal clear that these are absolutely not views I, nor any of the HSBC leadership team, share. They couldn’t be further from HSBC’s position,” she said.

Kirk did not respond to a request for comment. HSBC said it did not comment on individual employees.

To contact the author of this story with feedback or news, email David Ricketts