Dancing to a different tune?

James Corah, Head of Sustainability
4 March 2024

Recently, my 2 ¾ year-old daughter has grown rather fond of a song called the ‘Hokey Cokey’. For those of you who don’t know, the song is about putting a part of your body (arms, followed by legs) in and then out repeatedly before having a shake and turning around. It doesn’t make much sense, but she does a little dance, and it is quite cute.   

Sadly, the ‘Hokey Cokey’ is quite an apt metaphor for the investment management industry’s approach to Climate Action 100+, our main collaborative engagement on climate change. In sustainable investment circles it has been hard to escape the news that some of the world’s largest asset managers were in, but now they’re out. This, unlike my daughter, is definitely not cute, particularly as it comes against the backdrop of the world already reaching, hopefully only temporarily, the key 1.5˚C warming limit.

Whilst we recognise that these managers are not giving up on climate engagement all together, it is hard to see this as anything other than bad news.

At CCLA, we firmly believe in the power of collaboration to drive change. When it ‘sings from one hymn-sheet’ the investment industry can be a powerful actor in driving the world forwards. This is particularly important now, as Climate Action 100+ makes the long-needed shift from pushing companies to disclose their negative climate impacts to actually trying to reduce them.

It is easy to see this withdrawal as part of a wider trend. In the face of the ESG backlash and growing regulation we are seeing a number of asset managers decrease the emphasis that they are placing upon sustainable investment. Whilst this is clearly bad news, it could have a silver lining. This retrenchment could re-centre the sector back to the investors who really mean it; those who really believe that the point of sustainable investment is to make money and make a difference.    

So, we hope that the ‘big names’ will put their ‘arms back in’ eventually. But until then, we, along with other purpose driven investors, will be dancing to a different tune. This one recognises that climate change is a major threat to our planet, our way of life and the functioning of markets. This song doesn’t go around in circles, it demands that we do everything we can to stop climate change from happening.