Lucian Camp is a financial services brand consultant, copywriter, author and blogger. He co-presents the On The Other Hand podcast.
Even after at least ten years of noisy debate, there’s still very little sign of the whole ESG investing thing settling down, at least as far as investments for individual consumers are concerned.
(There’s even less sign of the institutional investment market settling down, but I don’t think I’m clever enough to include that much bigger and more complex subject in a blog that’s not supposed to run to much more than 800 words.)
The continuing unsettledness is due, at least in part, to the way that important new things keep happening to change the equation. The latest of these is the coming of Consumer Duty, which, according to some, requires asset managers and intermediaries to hold conversations about ESG investing with all their clients and then to provide investments that give them the degree of ESG-ness they said they wanted. (Others, of course, say this is completely wrong, creating another of the highly polarised and unhelpful differences of interpretation that seem characteristic of the industry’s response to Consumer Duty.)
I can’t help with the question of timing – when, if indeed ever, the settling-down might happen – but I may be able to share a bit of insight into what the settled-down ESG market might look like. At least, I can come up with three alternative scenarios and I can try to bring them to life with analogies from other markets.
(As ever, though, and I’ll say this before you do, the analogies aren’t much more than 50% relevant. It won’t escape your attention, for example, that the first couple are about developments very largely shaped and driven by government intervention, in a way that doesn’t seem likely in ESG investment issues. Still, if you can get past this rather important difference, you may find something in them.)
My first analogy is to do with the coming of unleaded petrol. Some while ago now, the government decided that putting lead in petrol was a bad thing and should be banned. It was impossible to ban it overnight. But a three-pronged process of change – focusing on car manufacturers, oil companies and motorists – steadily reduced the use of lead in petrol until now it has almost completely disappeared. As far as I can remember, no-one got terribly upset about this: most people agreed that getting the lead out of petrol was a good thing, and provided it could be achieved over time, without trouble or cost – which it was – it was hard to argue with it.
The second is that it could be like biodegradable packaging. This is still very much a work-in-progress, but it seems to me that the government is much less willing to use legislation, or even to enforce a comprehensive timetable, to bring about change. Again there’s a sort of three-pronged programme, addressing food producers, retailers and consumers, but with only very limited legislation and much of that not very effective (I’ve heard it said that the move from single-use plastic carrier bags to so-called Bags For Life has actually increased the amount of fossil fuel necessary for their much heavier-gauge plastic.) Moving to biodegradable packaging is a bit of a pain for all concerned – producers say it’s hard to make food look good, retailers say it’s hard to display it effectively and consumers don’t like getting home with all their fruit and veg muddled up at the bottom of their hessian bags – so, without much in the way of legal obligation, progress has been slow and only a minority of determined consumers shop in a way that makes a real difference.
And then my third option – from food again – is vegetarianism, and indeed veganism. Both have seen a great deal of growth in recent years, but government intervention and regulation have had very little to do with it. It’s been individual consumers who have decided which option works for them, and producers and retailers have had to respond by meeting the particular needs of each segment. There are a bewildering number of slightly-different segments, from the hardest-core vegans at one extreme to, well, me at the other extreme. (My distinctly token effort has been to decide, a few years ago that I don’t think we should eat octopuses, which are nice and intelligent creatures. But I eat pretty much anything else even including, I’m a little ashamed to say, squid and cuttlefish, which strike me as octopuses’ much less engaging second cousins.)
Anyway. I digress. The point is that in this case, a market-led solution has driven the outcome – and the result is a market which is either far too chaotic and complicated, or wonderfully diverse and individualistic, depending on your point of view.
So those are my three alternatives. At some point in the future – five years? ten years? twenty? – the consumer-facing ESG investment market will look a bit like the market for either unleaded petrol, or biodegradable packaging, or vegetarian and vegan foods.
Which, if I’m honest, isn’t the most valuable insight I’ve ever offered. But it did allow me to get in a plug for my Save The Octopus campaign.