Let’s start by being brutally honest, if untrendy. The planet does not care what we call companies that emit carbon, destroy rainforests or fuel inequalities, or how we classify them in funds. Names do not change the weather, wipe out species, start or end wars or famines.
The problem however is that investors do care what things are called. And investors matter.
Major investors need to be able to properly understand and analyse what companies do and how they operate. And as the importance of such things has grown investor language has needed to become more sophisticated and nuanced. By contrast however individual investors – who mostly do not spend their lives thinking about investments – are baffled by lots of different new terms, which they often see as jargon.
I’ve been involved in this area – variously known as sustainable, responsible, ESG, impact or ethical investment – for nearly 30 years now and have a somewhat conflicted view on names and labelling conventions. I know words are both deeply irrelevant and hugely important. I also know – as David Attenborough’s most recent book beautifully describes – baselines shift, meaning what is widely accepted today will soon be seen as either too weak or too strong. Most probably the latter.