It may be hard to imagine that ESG, now a hotly debated topic in American politics, traces its roots back to a former UK tabloid reporter and a 45-minute meeting in a fifth-floor office in Geneva (United Nations).

[Gunnar Larson]

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bloomberggreen
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 It may be hard to imagine that ESG, now a hotly debated topic in American
politics, traces its roots back to a former UK tabloid reporter and a
45-minute meeting in a fifth-floor office in Geneva.

There, he and a small team of United Nations staffers coined in 2004 what’s
now become one of the most controversial acronyms in finance. Their aim was
to get investors and bankers to weigh key risks such as the earth’s rising
temperatures, labor disputes and corporate malfeasance, and determine their
impact on profits.

Using the language of the capital markets — risks and opportunities — ESG
was meant to pivot away from socially responsible investing and appeal to
Wall Street.

But then ESG morphed into a label that was everywhere, and it came to mean
different things to different people. The three letters were added to stock
funds, bond issues, corporate ratings and Wall Street derivatives worth
trillions of dollars, creating confusion and disagreement that left the
acronym vulnerable to attack.
First, industry insiders criticized environmental, social and governance
investing claims for being little more than a marketing gimmick. Regulators
were next to crack down on money managers making hollow claims. And then
the Republican onslaught began, with US presidential hopefuls saying ESG is
something peddled by “left-wing radicals,” while states including Florida
pulled money from BlackRock, Wall Street’s biggest ESG proponent.

With the backlash reaching fever pitch, sustainable investors called for a
course correction. Others sounded the death knell for the acronym.

Bemused by the assault is Paul Clements-Hunt (pictured here), who led the
UN team that created the ESG label more than 18 years ago. He said the
attacks on their invention are in fact a “good thing.” Rather than being
upset, he said he’s decided to “relax and enjoy the warring parties attack
and defend ESG in equal measure.”

Read our interview with him about the future of ESG at the link in our bio
or visit: bloomberg.com/green

📷: Jose Sarmento Matos/Bloomberg
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