Political Economy seminar series
The uncertain foundations of sustainable investing and the politics of risk
Speaker: Dr Claire Parfitt, University of Sydney
Date and time: Tuesday 12 September at 12 noon
Location: Social Sciences Building (A02), Room 650, The University of Sydney
Sustainable investing, or ESG investing, is booming – and it is also in crisis. Massive growth in ESG funds, along with turmoil in financial markets putting pressure on returns, is driving a range of conflicts. In the USA, Republican and Democratic politicians are at loggerheads regarding the integration of environmental, social and governance (ESG) issues into investment decision-making. Several global financial institutions are under fire for ‘greenwashing’ their offerings to clients, misleading them with unfounded claims of sustainability. Regulators in the US, UK and EU have all responded by tightening disclosure and marketing rules for sustainable investing strategies.
At the heart of the chaos and controversy regarding ESG investing is a crucial contradiction. The core premise of sustainable investment is the proposition that there need be no conflict between economic, social and ecological sustainability. That is, there is no trade-off between profits and principles. ESG advocates have long exploited the ambiguity between their declared commitment to profit-maximisation through savvy ESG risk management and alluding to a relationship between ESG and vaguely defined ‘progress’.
Based on a forthcoming paper in Finance and Space, and embedded in a broader project that critiques sustainability capitalism, this presentation exposes the derivative logic of ethics that underpins ESG investing. Based on interviews with ESG practitioners, as well as an analysis of recent regulatory developments, the article demonstrates that there is no necessary connection between ESG investing and any particular ethical standpoint. Rather, the nature of the ethics involved is profit-driven, as well as historically and spatially contingent, which has a number of theoretical, as well as political and strategic, implications.