ESG Whistleblower Calls Out Wall Street Greenwashing

In the two years he spent running “sustainable investing” at BlackRock, the largest money manager in the world, Tariq Fancy was an evangelist for the idea that capitalism can help save the planet from global warming.

Now he’s an apostate, convinced that one of the fastest growth areas in financing is a sham. “It’s clear to me now,” he writes in a recent three-part essay in Medium, that my work “only made matters worse by leading the world into a dangerous mirage, an oasis in the middle of the desert that is burning valuable time.”

So-called ESG (environmental, social and governance) investing, Fancy argues, merely allows fund managers to charge higher fees for investment products that have “scant or little evidence of real-world impact that would not have otherwise occurred.” So what if these funds divest themselves of big-time polluters, like oil companies? Other investors will happily step in, leaving the companies themselves no worse off. As Fancy points out, “10% of the market not buying your stock is not the same as 10% of your customers not buying your product.”

Besides, he notes, green assets are just a drop in the ocean set against the $360 trillion of global wealth operating in a business-as-usual way.

Fancy’s argument draws on a sports metaphor. Wall Street is focused on scoring points (maximizing profits) not good sportsmanship (being a responsible investor.) To save the planet, you have to change the rules of the game. Ultimately, that means forcing companies to alter their ways by taxing their carbon emissions.

Fancy, a Canadian born to parents who emigrated from Kenya, turned whistle-blower to spark public debate. In that spirit, I invited him to join a panel on this week’s edition of Bloomberg New Economy Conversations along with Anne Simpson, the director for Board Governance & Sustainability at CalPERS, the California Public Employees System. Also on the show was Noel Quinn, the Group Chief Executive of HSBC.

The funds that Simpson represents are anything but trivial: close to $500 billion in CalPERS, and another $55 trillion (with a “t”) as part of a group that CalPERS helped form called Climate Action 100+, which describes itself as “an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.”