Tesla, ExxonMobil, global banks and ethics

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Stuart Kirk, global head of responsible investing at HSBC World Bank, said

Wayne Drought/nzpa

Stuart Kirk, global head of responsible investing at world bank HSBC, said “climate change is not a financial risk we need to worry about”.

John Berry is co-founder and managing director of ethical fund manager and provider of KiwiSaver Pathfinder Asset Management

OPINION: Our investment decisions, including what our KiwiSaver invests in, can undoubtedly improve our world. Or they can do the opposite and fund activities that are harmful to people or our planet.

Investing ethically can be difficult, but it is absolutely necessary if we are to shape a better future.

Despite this, the past month has again shown that in addition to being necessary, ethical investing can sometimes be complicated and confusing.

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Let’s start with climate risk, a huge challenge that will play out over the next decade and beyond.

Banks and insurance companies need to consider climate risk for their balance sheet and also frankly because they need to care about a stable and prosperous future world.

John Berry says he was confused when the Western world's largest fossil fuel producer, ExxonMobil, entered the ESG index, but Tesla was kicked out.

Ricky Wilson / Stuff

John Berry says he was confused when the Western world’s largest fossil fuel producer, ExxonMobil, entered the ESG index, but Tesla was kicked out.

You’d think global bank HSBC would agree with that, given that its chief executive, Noel Quinn, said “our ambition is to be the leading bank supporting the global economy in the transition to net zero. “.

Yet Stuart Kirk, global head of responsible investing in HSBC’s asset management arm, had other ideas.

While Kirk is expected to be the bank’s frontrunner for climate change action, last week he said “climate change is not a financial risk we need to worry about.” He explained that climate concerns are akin to another “crazy job telling me about the end of the world”.

While I would argue that a bank’s business is not just about locking in future profits for shareholders, Kirk clearly disagrees.

He noted that since HSBC’s average loan term is six years, “what happens to the planet in year seven is actually irrelevant to our loan portfolio.”

It’s fine to express a contrary point of view, and in fact, I believe that we should all seek opinions opposed to our own.

But this view coming from the head of responsible investment at a bank financing a transition to a low-carbon economy is just plain bizarre.

To HSBC’s credit, its chief executive, Noel Quinn, publicly condemned Kirk’s comments.

But last month’s confusion and contradiction for ethical investing didn’t end there.

Tesla, the global electric car innovator, has been removed from the environmental, social and governance (ESG) index of the S&P Dow Jones Indices for US stocks.

As the company leads the transition to sustainable transportation less dependent on fossil fuels, it has been marred by its lack of a low-carbon strategy, as well as concerns about discrimination, working conditions and safety. .

Predictably, Tesla CEO Elon Musk has spoken out alleging that ESG “has been weaponized by fake social justice warriors.”

I scratch my head when the Western world’s largest fossil fuel producer, ExxonMobil, entered the ESG index, but Tesla was kicked out.

The past month has sown confusion over whether ExxonMobil is more environmentally friendly than Tesla, and whether banks like HSBC leading the transition to a low-carbon world should actually care about climate change.

Forget this madness of May. Despite the bizarre decisions of a passive ESG index and offbeat commentary from a responsible investment manager, the ethics of your investment decisions, including your KiwiSaver, really matter.

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