- The debate surrounding the merits of ESG investing continued on Thursday.
- Fund manager Hal Lambert noted some of the double standards involved in banks claiming to follow ESG principles.
- An Allianz fund manager noted ESG acts as a "risk mitigation tool."
Social Capital CEO Chamath Palihapitiya said on CNBC’s “Squawk Box” segment on Wednesday that ESG investing is a “complete fraud.” On Thursday, Point Bridge Capital CEO Hal Lambert double-downed on the same network to explain why the venture capitalist was spot on in his analysis.
Fraud And A Double Standard
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ESG is a fraud because shareholder and investor interests aren’t prioritized, Lambert said. One of the most recent examples is Wall Street giants J.P. Morgan and Goldman Sachs, both of which announced they won’t finance companies drilling for energy in the Arctic.
In what way do J.P. Morgan and Goldman Sachs’ investors benefit from this decision, he asked. In fact, Lambert said he spoke with U.S. Senator Daniel Sullivan (R-AK) who is “very upset” over the banks’ decision. In return, the Senator will recommend the two banks be blacklisted from any exposure to Alaska’s $70 billion sovereign wealth fund.
“That can’t be good for them,” Lambert said.
The argument can be made that other pension funds or large institutional investors would say they won’t do business with banks who have exposure to Arctic drilling, “Squawk Box” co-host Andrew Ross Sorkin said.
Lambert responded this would be beyond hypocritical, as both J.P. Morgan and Goldman Sachs were selected to play a role in Saudi Aramco’s initial public offering. Saudi Aramco is the world’s largest oil company with a valuation north of $1 trillion.
“So they are worried about climate [change] but they are going to do the largest IPO ever in oil and gas,” he said. “Look, oil and gas is the most important sector of this economy. You think the coronavirus would disrupt things — or is disrupting things?”
If the “environmental extremists” manage to completely shut down the energy sector tomorrow, the economy will “shut down” immediately, he said.
ESG Pro Responds
Allianz Global Investors senior ESG strategist Christian McCormick responded to Lambert’s comments. He said J.P. Morgan and Goldman Sachs have a responsibility to “answer to their shareholders” but actual ESG investment professionals have to “answer to our clients” by delivering the best opportunity for maximizing returns.
McCormick said that evaluating investment ideas from an ESG lens does offer a better long-term risk assessment. At its core, ESG is a “set of data and a set of factors” that can be applied to investment processes.
“For us, it’s much more of a risk mitigation tool,” he said. “So we don’t look at it the same way.”