I survived the worst ESG backlash since the term was invented. Today’s ESG critics are running out of ammunition

In 2007, I co-founded the investment company Auður Capital in my native Iceland. We set out to bring more “feminine” values ​​into finance, with the overriding philosophy that we would seek profit with principles and put environmental, social and governance issues at the heart of our investments.

The following year, a global financial crisis brought down Iceland’s financial sector: a black swan that swept reality from under our feet. Our firm was the only asset manager to survive intact. We’ve gone from being mocked by some in the industry to being trusted by a rapidly growing community of customers.

Time and equipment mattered, of course, but it was our vision and principles that set us apart. We reject the view that women are risk averse. We believed then, as I believe now, that gender balance in business and finance raises risk awareness and better positions companies to navigate future risk and the black swan events that always come.

“Black swans seem to swoop in from all directions on a regular basis,” Fortune CEO Alan Murray wrote in daily CEO August 30th. Is right. As the world emerges from a once-in-a-century pandemic, people in nearly every corner of the world are grappling with at least one unprecedented climate event: extreme heat, devastating fires, catastrophic flooding, historic drought and the cascading impacts that often follow, such as food crises, economic difficulties and social unrest.

Europe is facing a particularly acute emergency, brought on by Russia’s ongoing war in Ukraine. the continental energy crisiswarns the co-founder of Alexa Capital, Gerard Reid, it is sending “seismic shocks so large that they could destabilize the entire ecosystem: the social, economic and political fabric of Europe”.

These are ESG issues whether we call them that or not.

In decades past, financial managers tended to look in the rearview mirror, prioritizing their assessment of past performance over awareness of future risk. These days, we only need to read the latest Wall Street analysis to spot potential black swans on the horizon.

For business leaders, risk awareness and resilience They are the new essentials. If you want to prosper, this is the question you need to ask yourself: Is our business prepared to weather the coming storms?

Risk awareness alone will not guarantee prosperity, but companies that lack resilience may find it difficult to access capital when they need it most, as recession looms in Europe, for example, and climate and ecological change continue. at a fast pace. Asset owners and managers are prioritizing resiliency; their actions are neither motivated by politics nor driven by ideology. It’s a fiduciary duty and a responsible business, plain and simple.

ESG is ultimately about building resilience for people, our shared planet, and business. It’s about measuring the things that matter, about equipping companies with the knowledge and agency to survive and thrive in a changing and uncertain world. It’s about equipping investors with the solid data they need to build truly sustainable portfolios.

My friend Mindy Lubber wrote a fantastic comment for Reuters last month, crystallizing the choice facing business leaders, investors and lawmakers alike. “The bottom line is that the effects of climate change will mean one of two things for companies’ long-term prospects,” he writes. “Either their resources and assets will be at serious risk, or they will avoid the worst of that risk because our society switched to a cleaner economy. That means investors and companies that are best prepared to literally weather eventual storms and ease the energy transition are the ones who will win in the coming decades.”

The recent ESG backlash, which prompted Mindy’s response and a host of others, is unfortunate but unavoidable. On an August 26the essay, Morningstar’s Jon Hale diagnosed the reasons behind the anti-ESG pushparticularly in the United States: tort politics, fossil fuel protectionism, and anti-stakeholder capitalism.

ESG is a set of tools, not a panacea. And it’s far from perfect. The sea of ​​related acronyms is frustrating for many. The lack of meaningful and comparable data is a key hurdle investors face. The disjointed landscape of ESG reporting continues to give life to “greenwashing”, allowing some companies to exploit the rhetoric of sustainability without matching words with meaningful actions. These are dilemmas that we must recognize and face.

But the ESG backlash is here because the big picture is real, and the impulse does not disappear. Massive amounts of capital are already pouring in. “Over 90% of S&P 500 companies now publish ESG reports. ESG will exceed $40 trillion in assets this year. The amount allocated to sustainable investment funds reached around 2.5 trillion dollars at the end of June”, according to Bloomberg.

Leaders attacking ESG adoption and clinging to “business as usual” are terrified that their old power playbook is under threat, from old power capitalists to opportunistic politicians in the US and elsewhere. . Business as usual is how they cling to power. ESG done right is fundamentally about transparency, and transparency puts the power back in the hands of the people. It is a force to restore trust and catalyze belief in our ability to navigate the coming decades together.

That’s why we need a global baseline for ESG disclosures: to bring clarity and consistency to sustainability reporting so companies and investors can compare apples to apples. I applaud the efforts of Team B leader Emmanuel Faber in his new role as chair of the International Sustainability Standards Board (ISSB), which is developing a global base of sustainability disclosure standards, a common language that enables investors evaluate the risks and opportunities of sustainability of companies. . “ISSB Sustainability Financial Disclosures will be the language of resilience for the capital markets,” Emmanuel shared with me in a new The catalytic conversations interview. I invite you to see it.

Support for ISSB efforts is growing, including from the G7 and G20, global financial regulators, the IMF, the UN, and others. Ultimately, the ISSB is a vehicle to incentivize sustainable business activities, tackle ‘greenwashing’ and enable the allocation of capital towards more sustainable investments.

Business leaders have the opportunity to show their support in a number of ways:

  • Engage formally with the ISSB as it develops its reporting standards, ensuring supportive business voices are seen and heard;
  • Advocate publicly and privately for the adoption of the ISSB baseline, engaging policy makers such as the European Commission and the US Securities and Exchange Commission; Y
  • Commit to the voluntary adoption of ISSB standards.

Through the adoption of a common sustainability language, we can unlock the best of ourselves and the entire system, accelerating ambition, action and responsibility to build a world that serves and protects us all.

Halla Tómasdóttir is the CEO of The B Team.

Opinions expressed in Fortune.com comments are solely the views of their authors and do not necessarily reflect the views and beliefs of Fortune.

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