Unsustainable progress?

So, ESG investing does not appear to be going well. Figures from Morningstar, the data providers, as reported in the Financial Times, says that only six ESG funds were launched in the second half of 2023, compared with 55 in the first six months of the year.

The FT says some investment managers are dropping the “ESG” moniker as the claims come under greater scrutiny. Regulators, too, are having a close look at sustainability claims.

Board Agenda would like to point out this doesn’t necessarily mean sustainability investing is a bad thing. But it does look like some funds are worried that they can’t properly demonstrate they are sustainable. Time to start getting real, guys.

Charging, but not yet at full power

Looks as if watchdogs over at the Financial Reporting Council are having a bigger impact. City AM reports that regulators at the FRC have imposed fines of £33.2m in 2022-23, up on the £32.8m in the previous year, which is a big jump from the Covid-hit year of 2020-21 when fines stood at £19m.

Imagine then what the FRC could do if it had the new powers it’s long been promised. This week in a podcast, the FRC’s chief executive, Richard Moriarty, said he would like the watchdog to have those powers, the ones that failed to turn up on the legislative agenda listed during the King’s Speech.

It was hoped the powers would turn the FRC into a new body, the Audit, Reporting and Governance Authority (ARGA). But the changes remain on hold, and likely to stay that way until after a general election.

“No one should be surprised that the King’s Speech was very limited,” said Moriarty, “given it’s the last year of the parliamentary term and a topic like audit reform didn’t make the cut.

“I am pleased that enhancing our powers does seem to have cross party and stakeholder support and it is the case that we will continue to press, but what it won’t do is distract us from our day-to-day work of really enhancing public trust and confidence in audit, in corporate governance and financial reporting.

“We still have a really important job to do and we will do it to the best of our ability.”

In the meantime, Moriarty will have to wait. Patiently.

Business as unusual

It’s Davos next week and, in advance, Simon Freakley, chief executive of AlixPartners, has authored an article for the World Economic Forum saying chief executives should be using their platform to push for a “world of greater peace and growing prosperity”.

Many people have lost faith in the media and governments, and chief executives are often cited in polls as more trustworthy as leaders on social and environmental issues.

“Many CEOs, understandably, are unsure whether and how to step into that void,” Freakley writes. “In a world that is fracturing within societies and between countries, however, CEOs have an opportunity—and, indeed, a responsibility—to take a more outspoken role as a voice of reason, rising above these divisions.”

Up the pinstripe revolution!