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.