Is this woke capitalism or sound financial advice?

First published on 17 February 2022 by Alastair
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Apparently, some 75% of consumer banking customers would prefer to deal with institutions that put purpose ahead of profits. And some 58% would pay a premium to access services with strong environmental and social governance (ESG) credentials.  A recent article in the accountancy trade press (admittedly from a firm with a vested interest in the subject), which quoted the figures above, went on to say:

“The role of the accountant in relation to SMEs is pivotal. Accountants will be key to communicating the ESG-driven benefits and compliance principles of new providers and suppliers to their clients. After all, compliance is still the accountant’s stronghold. 

“The ESG winds of change are blowing, and accountants need to acknowledge this will have an influence on their work. Whether it comes in the form of having information to hand about businesses and products’ ethical credentials, or only recommending to clients from a pool of such providers, professionals may soon find customers coming to them and seeking more proactive ESG-themed support. Accountants need to make sure their market knowledge is ready to respond.”

We, at M&S, would be interested to know your views. 

Would you refuse to take out a pension with a company that invests in businesses that do not conform to your own views on the environment – indeed, do you actually know what companies your pension provider invests with?

Would you refuse to invest in a company whose CEO has political views, or cultural views – or sporting views even - that you don’t like? 

Ethical finance is already permeating the consumer banking space – usually via cooperatives and credit unions. There are already companies set up to exploit this new mood in the finance industry, using the increasing public concern about environmental issues in particular to drive the changes they see as necessary.  Like it or not, it’s the current direction of travel.

For example, I’ve seen one article that proclaims the virtues of fund managers refusing to invest in fossil fuel companies.  However, on the other hand, it has to be noted that the fossil fuel companies are working on environmentally friendly alternatives, some for years, essentially because they are capitalist companies which will always seek to adapt to survive. Again, like them or loathe them, the big energy companies do have the necessary funds to help drive forward the change that the vast majority want to see – and they contribute substantially to many of our pensions, so do we dismiss them out of hand?  Some would, others would not. I rather suspect that once all our energy bills start to rise later this year, more than a few will be more concerned about the costs rather than the ethics of their energy supplier.

Then there is Norfolk County Council’s Pension Fund, which is currently suing Apple, not for ethical reasons but because it claims the US giant misled them. Yet you don’t have to go very far online to find evidence that Apple has broken Chinese Labour laws… And how many people use Apple products every day? (FYI - this blog was typed on an Macbook). 

This is a really difficult subject. Is it easier to sign up to ESG principles in theory, or to give the ‘correct’ answer to a survey, than it is to actually apply those principles in practice?  As St Augustine is famously supposed to have said, “Lord, make me chaste, but not yet…”  What do you think?  Please feel free to email us your views.

Vivian Linstrom, M&S Accountancy & Taxation

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