Back in 2009 the world was forced to take notice when a large number of emails sent by CRU scientists were uploaded onto Gavin Schmidt’s Realclimate. Shortly afterwards a comment was posted on Steve McIntyre’s Climate Audit website drawing attention to the upload and stating that ‘A miracle just happened’. This so-called miracle was the revelation that not everything that was being said and done privately by the CRU’s scientists fell into the category of what Jesus would do. Some of the claims made by sceptics went over the top somewhat but, at the end of the day, a picture had emerged of dodgy attitudes and partisan science. Suffice it to say that since that day much effort has been put into playing down the significance of the emails and there isn’t a true believer alive who would not tell you that the whole thing was taken out of context and nothing of any significance was revealed. Nothing to see here, move on.

Well, the world certainly has moved on and we now live in a society where trillions of everyone’s favourite denomination are being thrown at the problem of climate change and the transition to a fossil fuel-independent economy. To the extent that the drive for carbon neutrality is a business venture, the term coined for the ‘What Jesus Would Do’ rule book is ‘Environmental Social and Governance’ or ESG. It’s a very big deal for business nowadays, since any corporation that cannot convince its shareholders that it is on top of ESG can expect to be cast out of commercial heaven. In fact, eternal damnation awaits any organization that fails to offer up the requisite sacrifice to the gods of ESG, mostly in the form of endless policy statements, much auditing and self-flagellation and, of course, fastidiously produced financial risk management plans based upon a full acceptance of the level of threat confronting us all. The narrative is loud and clear: Climate change is an enormous threat but ESG is in control and so our ecological souls and investment portfolios are in safe hands. That, until recently, was the corporate world’s official position.

And then, last May, another miracle just happened.

This time the damaging revelation did not require the efforts of shadowy figures lurking in the background; no-one was suspended by a wire from a ceiling in order to avoid tripping the laser beam alarms protecting the computer terminals. The whole exposé required nothing more than a 15 minute slide show presented at a conference by a HSBC employee. However, what the presentation lacked in length it more than made up for in powerful home truths delivered to the corporate world. Home truth number one was that climate change was:

“…not a financial risk that we need to worry about. Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are always wrong”.

The presenter added:

“There’s always some nut job telling me about the end of the world.”

And to hammer home his point, he went on to opine:

“Who cares if Miami is six metres underwater in 100 years? Amsterdam has been six metres underwater for ages and that’s a really nice place.”

It seems that apocalyptic warnings may be keeping the school children awake at night but the financial investors are less than concerned. Accordingly, it wasn’t a graph of sea-level rise or CO2 emissions that adorned the presentation but this one:

I’m sure that the powers that be would have been more than happy to dismiss this heretical presentation as being nothing more than the ramblings of an ill-informed footsoldier occupying the lower ranks of the ESG army but, unfortunately, it wasn’t. The gentleman concerned was Stuart Kirk, former researcher at DWS Group and Deutsche Bank, ex-head of the Cambridge Union and writer of the Financial Times’ Lex column, and now head of HSBC’s Responsible Investing Team. This was what a ‘thought leader’ at the HSBC bank was telling the world about the reality of financial risk and climate change. He was pointing out that the apocalyptic threats were having little impact on the financial markets and so should not dominate financial investment risk plans. Far from applauding the efforts of the ESG faithful, he was bemoaning their impact, saying that ESG was overstaffed and absorbed with climate change and what it might do in 20-30 years whilst paying insufficient attention to immediate threats such as Crypto, China, the housing crisis, rising inflation, falling growth and the plummeting price of Target Corporation.

It’s not that Stuart is a climate denier, he simply felt that the apocalyptic projections made by the central banks were overly pessimistic and that adaptation was the way forward since it would not only manage the risk but offer many opportunities for lucrative financial investment. “Markets are crashing around our ears for nothing to do with climate whatsoever,” Kirk had concluded. He then urged his audience to “get back to making money out of the transition,” and to enjoy the break for coffee after his presentation ended.  

The revelation was dynamite, and so the bank’s chief executive Noel Quinn did what any other chief executive would do in the circumstances: he emphatically distanced himself from his appointed thought leader and suspended Stuart before the coffee had chance to go cold. And just to make sure that HSBC’s ‘true’ feelings were not misunderstood, HSBC Asset Management chief executive Nicolas Moreau sanctimoniously added that climate change was “one of the most serious emergencies facing the planet“.

And yet Stuart’s presentation had been cleared by his superiors beforehand!

What Noel Quinn had belatedly realized, of course, was that Kirk’s candid remarks had let the cat out of the bag and made a mockery of the HSBC’s many pious statements to the City regarding its commitment to ESG. The banking industry in general, and HSBC in particular, were now doing their greenwashing in public. It was appararent that not everything that the banks were thinking matched the corporate rhetoric and, as with the CRU scientists, not everything they were doing fell into the category of what Jesus would do. Kirk’s presentation had boldly gone where he shouldn’t have ventured and it was time to throw him under the bus.

Others, of course, were quick to wade in, dismissing Kirk’s views as ‘totally bizarre”, “regressive and grossly flawed” and emphasising that they “seemed to directly conflict with the science”. Helpfully, it was suggested that “this will force HSBC’s hand. If there is no correction issued and no heads roll, we will know a lot more about HSBC than we did a few days ago.” As with Climategate, a huge machinery was being quickly mobilized to deal with the tear in the space-bullshit continuum and normal service was soon to be re-established.

In the meantime, Kirk was less than happy with the way his employer had treated him and resigned last week, stating that, ironcally enough, his position was no longer ‘sustainable’. But he did not go quietly, delivering the following final salvo as his career hastily sailed off into the nearest professional fogbank:

“…humanity’s best chance of success is open and honest debate. If companies believe in diversity and speaking up, they need to walk the talk. A cancel culture destroys wealth and progress…There is no place for virtue signalling in finance.”

Although it turns out that there is. There’s just no room for someone who knows what they are talking about and who straightforwardly presents a reality check. Apocalyptic risk will never feature majorly in investment risk. As with the risk of nuclear armageddon, the value of your portfolio matters massively until the day the balloon goes up – after which all your investment errors are absolved. So, in the meantime, you might as well carry on buying low, selling high and adapting to whatever is thrown your way. It is this vision of the real world of financial investment and risk management that Kirk let slip.

21 Comments

  1. Bravo.

    Sorry to be repetitive but this is such an important story.

    The parallel with Climategate and all the blobwashing that followed stands.

    (I have to work on the blobwashing, but it’s far worse than greenwashing.)

    Kirk’s use of ‘cancel culture’ makes the link with other areas of wokery explicit. And quite right too.

    This opens up opportunities for the next Tory leader, across the woke/climate spectrum. Assuming some courage.

    Thanks for the first salvo.

    Liked by 1 person

  2. This strikes me as someone daring to tell the truth about the emperor’s new clothes, with the important difference that this time the person speaking out isn’t a little boy, but is someone who is paid to know what he’s talking about. The reaction is much the same, however, since nobody (apart from us and a few others) wants to hear the truth.

    The use of BBC headlines about first the suspension and then the resignation of Mr Kirk speak volumes, I think. They can, of course, be justified, and yet I can’t help thinking that they were chosen to create the impression that it’s Mr Kirk who’s the “nut job”:

    “HSBC suspends banker over ‘nut job’ climate comments, say reports”

    https://www.bbc.co.uk/news/business-61519111

    “HSBC banker quits after ‘nut job’ climate speech”

    https://www.bbc.co.uk/news/business-62085294

    Liked by 1 person

  3. Mark,

    Yes, I too got the impression that Kirk must be the eponymous nut job, until I read the articles. The expected take-home, however, is that Kirk has to be the real nut job to think that the merchants of doom are nut jobs.

    Liked by 1 person

  4. I fear the analogy is strained. The climategate emails exposed the bias and bad faith efforts of insiders promoting global warming/climate change. As such it undermined the default public attitude of deferring to scientific experts as reliable purveyors of truth about our planet. The same professional courtesy is not widely extended to investment advisors, Bernie Madoff notwithstanding. Q: “How do you know when your broker is lying? A: “When his lips are moving.”

    That said, the ESG chimera is dangerous, and has starved carbon energy companies of motivation to invest in future production of energy products upon which our way of life depends. Anything is good that exposes ESG as the greenwashing boondoggle it is. My nominee for a second miracle regarding climatism is the SCOTUS decision pulling the rug from under the US EPA. The Supremes not only took away EPA’s Clean Air Act fig leaf, they left the EPA completely nakedly accountable to do something, but only with clear Congressional authorization.

    The next miracle would be for SCOTUS to stop US Securities and Trade Commission from any involvement in ESG.

    Liked by 1 person

  5. Ron,

    You are quite right that the two situations covered in this article are not entirely analogous, and for a number of obvious reasons. The first situation relates to the methods of scientists seeking to understand how nature works and how human frailty can compromise those efforts. The second relates to financial experts seeking to make financially successful decisions under uncertainty. In this latter case, the problem is the pretence that following the creed of catastrophe has anything to do with such efforts. Kirk was criticised for failing to understand the science, but I criticise his critics for failing to understand what Kirk was saying.

    Another major difference is that in the first situation the system was put to work to cover up the behaviour of the miscreants, but there were no casualties in so doing. The same cannot be said of the second situation. That said, the universal casualty seems to be independence of thought.

    Liked by 2 people

  6. Jonathan Jones, an Oxford professor of physics no less, retweeted the notification of this post on the @cliscep account. And that’s good enough for me! (I made up my own mind as well but a blatant appeal to authority seems fine at this moment somehow.)

    I’m sure Ron’s right about what’s needed in the States after the EPA ruling. But this mooted parallel with Climategate is partly powerful because both events happened in the olde country, one in the backwater of Norfolk (oops, lost Kendall and Thacker there) and one in the prestigious City of London. And the Lex column is for me a big deal, as a local – with Nigel Lawson one of the distinguished alumni on that pseudonymous gig.

    Liked by 1 person

  9. Mike,

    Kirk’s speech has certainly ruffled feathers and there are many articles out there covering it. Opinions seem divided, with many saying he is the real nut job whilst others claim that he is only saying what the rest are thinking. I find the latter very plausible.

    When Climategate happened it was a bit like the scene when the wife comes home early to catch the husband screwing a pig, only to be told that it wasn’t what it seemed. That is now the wikipedia storyline. They are trying the same with Kirk but with less success. The truth is that what ESG does to good financial husbandry is just too much like screwing a pig.

    Liked by 3 people

  10. Just watched the video. He really went for it, brave guy. As the cultural fantasy of certain global catastrophe percolates all areas of society, it is bound to cause enormous hypocrisies in the operations of all sorts of domains, which eventually, simply cannot be hidden according to the rule systems and logic of those domains. In this case, the financial domain. At that point, *some* people must notice, even if this was by reading the small print at the back of the rules (which he did), in order to find out. I suspect the few who get to this point are simply too nervous to speak out, but every one who does, will encourage others. It was good that he quoted the IPCC in contradiction to the fantasy; this make it far harder to call him out as a denier or indeed a nut-job, because he is using ‘the science’ to actually back his case. This doesn’t mean of course there won’t be overwhelming emotional pressure to dismiss his view, somehow.

    Liked by 2 people

  11. One other point that is worth dwelling upon is Kirk’s use of the millennium bug as an example of how alarmist thinking can take hold. This is what James Murray of Investment Week has to say about this in his hit piece:

    “The example Kirk uses to justify his insouciance is also revealing. Remember Y2K, he asks, implying that concerns about digital disaster were overblown because “the lifts didn’t stop”. But as is widely understood across the tech industry, the risks presented by Y2K were severe and crisis was only averted thanks to considerable investment and comprehensive forward planning. As Paul Saffo, a futurist and adjunct professor at Stanford University, told Time magazine for a feature to mark the 20th anniversary of the Y2K panic: “The Y2K crisis didn’t happen precisely because people started preparing for it over a decade in advance.”

    https://www.investmentweek.co.uk/analysis/4050110/moral-money-businessgreen-editor-hits-stuart-kirk-climate-risk-speech

    Well is that so? I doubt if James Murray had any direct experience of working on Y2K and that is why he is talking instead about what is ‘widely understood’. It is also why he appeals to authority in the guise of a Stanford University professor. I, on the other hand, was responsible for undertaking the Y2K programme in a software house that had delivered software to many blue chip customers. We took it very seriously and re-tested all of our delivered software to ensure all Y2K bugs were discovered and corrected. The full set of industry recommended tests were performed. And what did we discover? Sweet Fanny Adams. Not a single Y2K bug.

    So, as far as we were concerned, there was not a single disaster averted. Nor do I know of any other of the software companies we dealt with who had anything to report. Nor did I read anything in the software development press providing a specific example of how a company’s Y2K programme had paid for itself. It was just a colossal waste of money. Even if one takes the broadest view, the number of reported faults were relatively few and minor. South Korea and Italy didn’t even bother with Y2K and yet came out the other end equally unscathed.

    So when Murray talks about what is ‘widely understood across the tech industry’ I think it behoves him to provide some specific examples of averted disaster and stop quoting half-baked professors who I suspect also didn’t undertake a single Y2K bug test themselves.

    Like

  12. John: It’s Italy that’s always stuck in my mind. I had a friend in those days working at a high level in the mining industry, including thinking about how you price assets in that extremely risky game. (But profitable, if you find greater than zero mines!) He was also in my church at the time and we got together a group of Christians to think it over with a couple of years to go. One of us was running the programme worldwide for HSBC. Of course Gerrard had never coded in his life! Another for Unilever. But, with the benefit of hindsight, it was Keith’s attitude that most impressed me. He looked into it, with the rest of us, for a little while, then said “It’s unknowable. So I’m not going to think about it any more.” He’d been posted to Australia by the time we met after the big day of 1/1/00, at a party, on a visit back to London. I mentioned Italy and he laughed. Yeah, they must have have been cracking open the champagne thinking of all that money they saved. Live and learn eh?

    Liked by 1 person

  13. Richard,

    I admit that I get quite annoyed when I read the sort of stuff written by Murray. Professor Saffo is the real culprit here because if he hadn’t written his ill-informed piece then Murray wouldn’t be slagging off Kirk so readily. Of course, the other received wisdom of the so-called experts is that lots of bugs were found but we all kept quiet about it. And we are supposed to be the conspiracy theorists?

    I’m not a violent man but I still have fantasies of wringing necks when I read this sort of thing.

    Liked by 1 person

  14. May I say that one of the main reasons I enjoy reading Cliscep is that every now and then we have a post from a real expert who had “skin in the game” who puts the boot in to the utterances of an academic “expert”. Yet another instance of this today from John. Respect.

    Liked by 1 person

  16. Thank you for that, Alan. I really do appreciate it.

    Experts are far too comfortable with their platitudes, often quoting other experts and their own platitudes. It frustrates me that they rarely condescend to talk to humble practitioners who got their hands dirty doing the job. Y2K was a very plausible risk that most people in the industry took seriously, or at least needed to be seen treating seriously. In the event, it wasn’t the threat it seemed. But this is the thing: although Richard says ‘we live and learn’, the shame is that we don’t. Experts continue making their predictions, oblivious to their appalling track record, and no one bats an eyelid. The day after Y2K proved a damp squib, we just said ‘hey ho!’ and went on with our lives. There should have been a massive kickback and an investigation into how we managed to scare the bejesus out of ourselves. But nothing like that happened. Instead, we continue to prophesize doom and pour scorn on people like Kirk who try to spoil the fun.

    Liked by 1 person

  17. Bill,

    Ah yes, the good old Business Continuity Plan. That’s another load of crap I had to deal with.

    Like

  18. Just as a short elucidation. Ha, I like that way of starting!

    When I said “Live and learn eh?” I meant myself. Which I really, really did. And, secondarily, you. (Ridgway.) You didn’t know you were going to find zero Y2K bugs. But at least you got paid for your efforts and you learned something important.

    I was thinking just about these two human beings. Especially myself.

    Like

  19. Richard,

    “I was thinking just about these two human beings. Especially myself.”

    I appreciate that, and it was a bit naughty of me to take your statement out of context. However, I couldn’t resist the opportunity to make a point that I think is well worth emphasising (though obviously not for your benefit): When prophecies of doom prove to be unfounded, those responsible for the alarmism are never short of excuses.

    The Y2K affair strikes me as a perfect example of how historical narratives (i.e. ‘just so stories’) can be invented to cover the blushes. As a result, nothing is learned. I’ll grant you that the storyline of IT teams saving the world has some plausibility, but only to those who do not understand how these things go down. Firstly, much of the effort to avert the disaster took the form of investment in new systems. If the older systems had the problem why not simply replace them? Certainly, the right outcome was achieved but at no stage did this strategy require anyone to prove that there was a serious problem in the first place. People acted upon plausibility only. Secondly, to the extent that bug fixing and re-testing played a role, we have to consider the historical record of success within the software development industry for delivering bug-free software following testing. Even if we assume Six Sigma applied (and it didn’t in the vast majority of cases) we should still have expected a large number of residual failures on the day. The fact that there wasn’t indicates that either the problem had never existed on the scale vaunted, or that it did but a miraculous and totally unprecedented level of quality control was achieved within the various Y2K programmes. No one could believe the latter except those who were either desperate to believe that the whole thing wasn’t a huge waste of money or didn’t have the insight to see the flaw in the storyline.

    I’ll leave the last word to Bruce Schneier, chief security technology officer at BT Global Services, who has chronicled the ways in which people overreact to some risks while ignoring others:

    “If it was really bad, you would think in some cases something would have gone wrong somewhere. But nothing went wrong. With Y2K the level of risk was overstated.”

    Liked by 1 person

  20. The money Italy didn’t spend – and they had no problems either – clinched it for me.

    You’re right of course that there’s a broader pattern of not taking responsibility. Jason Hickel was a new name to me today. As Sri Lanka goes into freefall, because of the failure of ideas he espoused, what will he do? Expectations aren’t high from anyone who’s read Thomas Sowell’s Intellectuals and Society. And Sowell’s telling of how the beautiful peace and good race relations of Ceylon as part of the British Empire turned into horrific civil war after 1945, because of other ideas of ‘equity’ brought in from western intellectuals, is one of the most moving things I’ve read from the black scholar. They’ve done it once and they’ll do it again. Whole peoples will pay the price.

    Y2K was clearly a non-problem. It also had a very fixed deadline by which how much of a problem it was would be revealed. Thanks Italy and South Korea for being the control groups. The precise date of Climate Oblivion of course has a habit of drifting out away from the time the alarmist is telling his tall tale. But should I have realised, like Keith, that Y2K was unknowable, ahead of time? And thus give up thinking about it? Yes. (Though the two guys running the programmes for multinationals were grateful for the support – what I would call pastoral support in fact. The more technical one, at Unilever, sent me a lovely note in January 2000, using a very perceptive phrase from the Methodist prayer book. But that’s a story for another day – and probably another audience!)

    Liked by 1 person

  21. As Mark has pointed out on Open Mic, the HSBC bank has been in the news today, accused of ‘greenwashing’ by the Advertising Standards Authority (ASA):

    “HSBC climate change adverts banned by UK watchdog”

    https://www.bbc.co.uk/news/business-63309878

    Of course, the article’s author, Annabelle Liang, had to bring up the Stuart Kirk affair by stating:

    “In July, Mr Kirk resigned from the bank and said that his comments had made his position ‘unsustainable’.”

    This is not the first time that the BBC has issued this disinformation. What Kirk actually said was that his employer’s behaviour towards him had made his position unstainable. The actual quote is:

    “Ironically given my job title, I have concluded that the bank’s behaviour towards me since my speech at a Financial Times conference in May has made my position, well, unsustainable.”

    I’ve looked elsewhere to see if anyone else reporting upon this had got it wrong. As far as I can see, it is only the BBC. Only the BBC sought to imply that Kirk admitted his comments were the problem.

    Like

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