We live in an era when democracies are often extremely tatty and eroded by corrupt political finance laws, rickety electoral systems and unconstrained lobbying.

Governments have as a consequence shaky legitimacy and reduced authority to govern. The undeniably important role of business has been fetishised and exaggerated far beyond what is healthy for society.


Problems like climate change that should be addressed

decisively by strong governments acting on behalf of citizens are instead addressed indecisively by governments that all too often see themselves as handmaidens to big capital, rather than as determined and confident regulators of big capital in the interests of broader society.

As neoliberalism has taken hold over the past 40 years and economies have become more financialised, asset managers have acquired enormous amounts of undemocratic power (Open Democracy article on ‘asset manager capitalism’). In a sense, asset managers design the future by allocating capital. This is a vital role, but one that becomes untethered from society’s deeper interests when the state functions of economic stewardship and regulation – are weakened as they currently are.

Unfortunately, while decent governments (a shrinking category in 2021) attempt to allocate investment and capital in line with the long-term interests of all citizens, asset managers allocate capital in the interests of a much narrower class of citizens – asset owners such as retirement fund beneficiaries. All too often, they invest with only short-term returns (up to three years on average) in mind. The prevailing culture in the asset management industry is all too often, determinedly amoral – prioritising narrow economic returns to asset owners and shareholders, and actively scorning ethical investment practices.


The failures of the status quo – climate breakdown, growing ecological disaster, social and economic inequality – are now so glaringly obvious that it has become impossible for the behemoths of capital to ignore them.

One manifestation of this recognition is the growth of various forms of responsible investment, most recently, the trend towards ‘ESG’ investment. ESG is an abbreviation of environmental – social – governance. ESG standards attempt to rank companies by scores allocated towards their management of a wide range of environmental (e.g. climate, water, biodiversity), social (e.g., labour and human rights issues) and governance (e.g., accounting practices and executive pay). Some classes of companies are excluded altogether. In portfolios, companies are upweighted, downweighted or outright excluded according to their ESG scores.

ESG standards however, are frequently opaque and complex, extremely difficult for ordinary investors to understand, and in practice, range from having some meaningful substance (many ESG indices do have initial hard exclusions on categories such as tobacco) to being rank greenwash. They give a very small class of unseen ESG analysts an outsize role in adjudicating whether or not particular corporate practices are good or bad, a role that is properly the domain of regulators subject to democratic oversight.

The development of ESG in practice seems to have shown that by and large, companies that pay attention to one ESG factor are more likely to pay attention to others (though not necessarily so; Tesla, for example, is focused on climate issues but resists union recognition). Also, in most instances, returns on ESG investments are similar to or better than those from sector benchmarks.

The thesis that ESG is no substitute for confident state regulation is supported by the fact that the only robust and transparent standards for ESG on climate issues have been set by the European Union: EU climate benchmarks and benchmarks’ ESG disclosures.

An important assessment of ESG ETFs was published in December 2021 by the consultancy Matter:

This paper utilises Matter’s granular sustainability data to analyse the 50 largest sustainability themed UCITS ETFs. Looking under the hood, the research examines the sustainability of these ETFs across a wide range of disaggregated sustainability themes and metrics. In doing so, the research provides a unique insight into the wider ‘ESG’ phenomenon, which is increasingly characterised by accusations of greenwashing and ineffectiveness.

Civil society has responded to the problems and inadequacies of the global financial sector with a variety of initiatives: divestment campaigns such as our own, and independent benchmarks for responsible lending and investment practices such as those originated by Fair Finance International (FFI), ‘an international civil society network of over 100 CSO partners and allies, initiated by Oxfam, that seeks to strengthen the commitment of banks and other financial institutions to social, environmental and human rights standards’.


Acceptance of ESG in South Africa is currently partial and grudging, and almost entirely confined in practice to offshore funds. Some asset managers embrace the trend; others grumble that the acronym is a useless label for practices they already integrate into their analysis.

If this were true, though, then SA asset managers would not be failing so miserably at integrating ESG concerns into their investment practices.

We can see these failures by scrutinising just one sub-domain of ESG considerations: integration of climate risk into investment practice. Local investment practices around climate have been surveyed in 2021 by Just Share. Their overall assessment: ‘While there are encouraging signs of local asset managers adopting the necessary approaches to successful, effective climate risk integration, relatively few of them demonstrate excellence when assessed against international best practice standards. Those that do align with international best practice do so in some areas, but not in all.’ Some supposedly blue chip local asset managers tick very few of the boxes identified as crucial in Just Share’s assessment. Others have even declined to participate in the research.