Are We Moving the ESG Needle Yet?

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Recently the CEO of a think tank heralded the outcomes of the Glasgow Summit “The roadmap and momentum are there; so, the big issue is now acceleration.” While another observer pinpointed the shortage of money needed to effectively meet the challenges of global warming. The money is not only needed to offset the damages and growing threats to smaller nations, but also to fund new enterprises and innovations which to date have been largely focused on mitigation. Both observers have rightly targeted the critical issues. What’s next is identifying the potential sources of significant, consistent funding and a complementary strategy for accelerating solutions.

Climate Diplomacy?

One unexpected outcome from Glasgow is that governments lack the political will to drive and sufficiently fund the ESG vision. First, governments move too slowly. Second, governance based on global meetings and forums requires constant compromise. Witness watering down the language from “phase out” to “phase down” in regard to the future of coal-fired plants. Plus, the failure to mention other fossil fuels (oil, natural gas) which, when combined with coal, are equal perpetrators of climate crises. Fossil fuels were omitted in the final hours because they didn’t get the necessary signoffs in the overall agreement.

[callout]All future investments by BlackRock will be filtered through standards that focus on a company’s ESG commitments and its measurable progress toward achieving such commitments. They unequivocally sum it up, “We believe that sustainability should be our new standard for investing.”[/callout]

Prosperity Purpose

Enter the private sector and the profit motive morphs into prosperity purpose. Just look at the amazing 180-degree pivots of financial institutions and their investment principles (not merely strategies), such as BlackRock. The nature of BlackRock’s pronouncements tells us that their commitment to ESG objectives is not a marketing trend but is, in fact, a seismic shift in values.

One only has to read BlackRock’s Co-CEO proclamations from Larry Fink and Barbara Novick including Novik’s “Toward a Common Language for Sustainable Investing” (posted on their website) to truly appreciate the scope and potential scale of this shift. In letters to their clients (most of whom are Gen Xers boomers and the Silents) climate change is positioned by rejecting “greenwashing” and mitigating risk. The profit motive is recast as the prosperity purpose, i.e., a broader sense of obligation and the “massive amount of capital that will be needed to address climate change” (CEO Novik’s words). They aren’t kidding around: This direction requires divesting portfolios of assets that do not serve ESG objectives. And going even further, Fink says all future investments by BlackRock will be filtered through standards that the financial institution is developing to focus on a company’s ESG commitments and its measurable progress toward achieving such commitments. This new standard is the measure for advising clients on sound and meaningful investment decisions and go or no-go investments. Novik unequivocally sums it up, “We believe that sustainability should be our new standard for investing.”

The Retail Response

As BlackRock’s pivot is built upon its brand reputation as a trusted financial advisor to its clients, retailers need a plan that is built upon their unique strengths as well. It should begin with a shift away from a transactional business model to a relationship business model, i.e., from merely selling things no matter what the impact on their brand may be, to aligning with their customers’ emotional needs and forging bonds of trust. This requires transparency and a shift in company values, or risking a loss of authenticity. At all costs retailers must avoid “greenwashing” and achieve credibility with a loyal consumer following to effectively factor in ESG initiatives.

Retailers can tap into their deep databases built over years of POS data gathering honed and refined by AI and Machine Learning. This granular differentiation of consumer segments offers the opportunity to produce marketing messaging that aligns with customer positions on ESG. With additional drill-downs, retailers may identify additional affinities and related personalized messaging. These campaigns must be authentic, supported by corporate practices that are commitments, not marketing tactics. Any communication related to ESG falls into the domain of strategic pronouncements tied to ESG goals, standards and progress. Retailers can also take a page from Blackrock’s playbook and focus on investments that are ESG compliant. ESG can be an asset on many levels beyond operations but again, the initiatives must be real.

Follow the Money

Wealth and money, combined with political, social, and economic will is what will drive sustainable initiatives. If you follow the money, it becomes clear which American generations are going to come to the rescue and retail can help lead the way. The median age in the U.S. is 39. However, the baby boomer segment (numbering 72 million) is sitting on 60+ trillion dollars in assets and over 45 percent of the nation’s wealth resulting in $14.5 trillion in investable income! Boomers have embedded values and dispositions toward radical change since their formative years. From the Civil Rights movement to Woodstock, Stonewall and the Vietnam War protests, this generation has been mobilized for causes of consequence for over 50 years. Yet boomers are too often overlooked by the media, ad agencies, analysts, NGOs and ESG strategists as a major source for the “massive amounts of capital needed,” to say nothing of honoring their passion for meaningful causes. Even with their collective wealth, they have become the invisible generation.

Boomers’ millennial children have reported assets of $5 trillion and Gen Zs, in the hundreds of millions.

So, if viewing wealth as the basis for investments, Gen Zs and millennial’s do not yet have deep enough pocket assets needed to fund and invest to drive climate change. Millennials are consumed with college debt, mortgages, marriages, and children while Gen Zs are still emerging and will not be fully in the workforce until 2030. But in the long term, it will be on the shoulders of millennials to invest in ESG assets and support innovative technologies, research and NGOs with seed money to start and funds to grow. This in part will come from their own earnings but estimates have it they will inherit upwards of $66 trillion in assets!

Spread the ESG Wealth

Sustainability, social justice issues, authenticity and civic responsibility are lightening point issues for next gens. For ESG initiatives to be funded we need everyone in on the plan. We should be crafting narratives that recognize each generation and encourage them to embrace broad and meaningful social causes. We should make the appeal to encourage everyone to exercise their social wills to support ESG with time and energy and financial resources as well. We should also look to the private sector and investors who can support new technologies, institutes, and NGOs to encourage their quest to meet the climate crises head-on. Clearly it’s imperative that we envision ourselves as a community of cohorts, a vital networked source to accelerate solutions and to move the needle forward before it’s too late.

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