Saving the Planet? Don’t rely on big corporates, even less so finance companies

Companies are happy to talk about the need to fight climate change but reluctant to join the war, according to research into 1,000 European companies by the Alliance for Corporate Transparency.

The financial sector comes out worst at setting itself climate targets, the survey adds. 

When you ask asset managers why they fail to lobby companies to come up with green pay benchmarks they reluctantly, and privately, concede this would lead to criticism of their own pay policy

None of this will surprise family offices who have learned to be cynical about the initiatives on offer from established companies and financial advisers hugely incentivised to retain the status quo. Right now, direct action through venture capital, disruption and impact investment is a far better way to save the planet.

The ACT study came out of a European Union directive to foster social and environmental transparency. Backed by legal firm Frank Bold, it shows chief executives are abysmal in setting effective targets in line with the directive, not least because of their addiction to profit margins. Their talk of saving the world amounts to little more than greenwashing. 

A majority of executives fail to disclose how sustainability is embedded in operations and governance. Nearly three-quarters of the sample fail to describe a formal process of engaging with workforces. More than 90% are failing to use science to support their targets. 

More than 85% of companies are failing to prove that executive pay is affected by corporate performance compared to green benchmarks. No doubt, because it isn’t affected one bit. 

The pay issue is important because the route to chief executive decisions runs through their wallet. There is a little progress: Royal Dutch Shell, for example, has agreed a green pay benchmark following a lobby by pension schemes belonging to Climate Action 100+.  

But when you ask asset managers why they fail to lobby companies to come up with green pay benchmarks they reluctantly, and privately, concede this would lead to criticism of their own pay policy.  

It gets worse. The ACT says 55% of lenders are happy to talk about specific risk exposures. No more than 13.4% define them. A meagre 3.1% analyse the exposure of underlying assets to climate risk. 

The ACT adds that no more than 20.5% of finance companies have set climate targets, easily the worst outcome of any sector, although they can be relatively scientific compared to the rest. 

In a preamble to the ACT report Richard Howitt, former chief executive of the International Integrated Reporting Council, warns European companies have rowed back on earlier commitments: “The option to give more time for companies to comply may actually produce the opposite outcome.” 

Expect tough talking from Mark Carney when he steps down as Bank of England governor to become United Nations climate envoy. 

Family offices are becoming increasingly worried about climate change. A recent survey by UBS found 53% of respondents believe it is the biggest threat faced by humanity. They expect sustainable investments to rise from 19% to 33% of their portfolios over five years.

The next generation are even more suspicious of financiers and fearful of climate change. They want to work for venture capital firms which achieve a sustainable impact, as opposed to traditional careers in banking and property development. In extremis, the likes of Aileen Getty, the granddaughter of J Paul Getty,  are willing to fund Extinction Rebellion. 

In their hands, the financial sector will never be the same again.