ESG investing is still immature and needs further codification, according to the CEO of Northern Trust.
Steven Fradkin, President, Wealth Management, was asked at the Financial Times Global Banking Summit how the $1.3 trillion asset and wealth manager is responding to a growing backlash against ESG.
“First of all, thank you for asking about a controversial topic at a global Financial Times conference,” Fradkin joked. He was possibly alluding to the scandal last year when HSBC’s Head of Responsible Investing was forced to quit after a speech criticising climate change “hyperbole” at another FT event.
Fradkin argued that ESG was currently “very, very young and very, very immature”, with a lack of codification and different firms thinking about it differently.
“There are different definitions, there are different frameworks, different levels of analytical rigour and accountability.”
He noted that ESG has become a highly polarised issue. Many investment managers such as BlackRock are facing criticism for both doing too much and doing too little on ESG, with activists on the left lambasting them for doing too little and figures on the right for prioritising sustainability over the fiduciary duty to provide returns to shareholders.
“There are passionate people who are pro-ESG and passionate people who are anti-ESG,” said Fradkin, adding that Northern Trust has clients that fall into both brackets.
He argued that there is “no monolithic answer” and the firm’s view is that it is a “client choice”.
While he accepted that the business was feeling some pressure, the firm’s guiding principle was that it is “in business to serve our clients”.
“There is a lot of controversy around it but in the end it’s client preference.”
He added: “We can help them with ESG or we can keep them as far from ESG as they want.”
