One in three Americans believes aliens have landed on Earth and are dwelling among us. There are quite a lot of things they do not believe in, however, including the importance of the fluffy stuff in investment.
Parallel reports from the European and US social investment forums on the perception of environmental, social and governance issues among investment consultants seem to show American consultants are much less comfortable with the concepts and less inclined to see them as a natural part of investment consultancy. This despite a general belief (expressed by 88 per cent of respondents) that client interest in these matters will increase in the next few years.
While the European consultants were a little confused about their responsibilities and how appropriate it was to talk to clients about responsible investment, the American were either very unsure or positively hostile. The reason for this may not just be an ideological opposition to anything other than hard-headed capitalism. Rather, one RI expert at a presentation of the European report in London suggested, it may be regulation-driven.
In Europe, the idea that responsible investment is not only compatible with, but an integral part of, fiduciary obligations is gaining currency. In the US, where the asset management industry looks to the Employee Income Retirement Security Act for its understanding of its role, the idea that investors must choose between return and feeling virtuous, which implies responsible investment is in breach of fiduciary duty, still holds good for many.
One respondent to the US survey was emphatic. “I do not advise ESG principles in an Erisa plan. If a client wishes to pursue this approach, I would refer them to a consultant with that expertise. I would also resign or recuse myself or my firm from being hired as a ‘co-fiduciary’.”
Concern about legal obligations is not the only barrier to US consultants taking RI seriously. Not everyone thinks it would be legitimate, even if the law allowed it.
“Climate change is a myth. Global warming is a hoax,” said one US consultant.
It comes as no surprise that Americans lag behind Europeans in their acceptance of climate change and understanding of its implications, but it is always a shock to hear it said so openly. Tempting though this world view may be, its proponents rarely have any solid argument to rebut the consensus that climate change is going to affect us all. We are left with the depressing fact that many Americans are still blinding themselves to the problem.
The optimist might see the potential competitive advantage for those investment consultants and managers who grasp the opportunity to use responsible investment to enhance their long-term performance, but the pessimist must surely see the world’s largest asset management market continuing to support unsustainable businesses with no thought for the planet’s future.