Should businesses worry about climate risk because doing so is good for their bottom line, or because their responsibilities ought to go beyond mere financial returns to shareholders? What if expanding one’s lens to include environmental, social, and corporate governance turns out to be good for business? What if not? These fundamental questions lie at the core of numerous ambitious efforts to align tools and resources of finance with global action to address climate change. And they have been raised again with alarm in recent weeks after the head of responsible investment for HSBC Asset Management, appearing at a Financial Times “Moral Money” event, gave a talk that was neither responsible nor moral.
Concern about “greenwashing” and the lack of metrics and accountability to document that investments achieve their claimed environmental goals is more than warranted. But while arguing that he was taking strictly “a financial and investment view of the topic,” Stuart Kirk’s talk was beset with factual inaccuracies and showed a profound lack of understanding of climate risks and their financial implications. Despite much progress, some of these views remain troublingly widely held among many in the financial sector, whose well-informed engagement is essential to mitigating and adapting to climate change.