WEBVTT 00:00:06.745 --> 00:00:08.320 align:middle line:90% So what is ESG? 00:00:08.320 --> 00:00:12.820 align:middle line:84% Well if you're anything like me, an acronym makes you flinch. 00:00:12.820 --> 00:00:17.020 align:middle line:84% It stands for Environmental Social and Governance metrics. 00:00:17.020 --> 00:00:20.680 align:middle line:84% And you may hear that and think, well, it means do gooding. 00:00:20.680 --> 00:00:22.600 align:middle line:84% You might also think that actually it 00:00:22.600 --> 00:00:26.170 align:middle line:84% reeks of hypocrisy, given that many financiers 00:00:26.170 --> 00:00:28.240 align:middle line:84% and companies are tossing it around these days. 00:00:28.240 --> 00:00:30.940 align:middle line:84% However, there's something really important to consider, 00:00:30.940 --> 00:00:36.520 align:middle line:84% which is today, ESG is as much about risk management 00:00:36.520 --> 00:00:39.460 align:middle line:84% as it is actually about social activism 00:00:39.460 --> 00:00:42.610 align:middle line:90% or trying to change the world. 00:00:42.610 --> 00:00:46.590 align:middle line:84% What many companies and investors have realised is that 00:00:46.590 --> 00:00:50.520 align:middle line:84% if they ignore what people used to call "externalities," 00:00:50.520 --> 00:00:53.280 align:middle line:84% other words, a company's environmental footprint, 00:00:53.280 --> 00:00:56.790 align:middle line:84% its impact on a community, what's happening in its supply 00:00:56.790 --> 00:01:00.090 align:middle line:84% chain, what's happening in terms of social issues like 00:01:00.090 --> 00:01:02.490 align:middle line:90% diversity, inequality. 00:01:02.490 --> 00:01:05.610 align:middle line:84% If companies and investors ignore those issues, 00:01:05.610 --> 00:01:08.769 align:middle line:84% it has a nasty habit of coming back to bite them. 00:01:08.769 --> 00:01:09.740 align:middle line:90% What do we want? 00:01:09.740 --> 00:01:11.895 align:middle line:90% Justice! 00:01:11.895 --> 00:01:14.730 align:middle line:84% Just think about #MeToo and what happened there. 00:01:14.730 --> 00:01:18.120 align:middle line:84% Before that scandal exploded - or rather that movement 00:01:18.120 --> 00:01:20.490 align:middle line:84% exploded online - most boardrooms 00:01:20.490 --> 00:01:24.390 align:middle line:84% assumed that sexual scandals, gender issues, 00:01:24.390 --> 00:01:26.130 align:middle line:84% were something that they didn't really 00:01:26.130 --> 00:01:29.100 align:middle line:84% need to worry about as a corporate governance matter. 00:01:29.100 --> 00:01:32.640 align:middle line:84% But after #MeToo exploded, they suddenly realised that 00:01:32.640 --> 00:01:35.670 align:middle line:84% the power of the crowd coalescing suddenly could shake 00:01:35.670 --> 00:01:36.570 align:middle line:90% the entire board. 00:01:39.640 --> 00:01:42.340 align:middle line:84% Just consider for a moment the turnaround 00:01:42.340 --> 00:01:44.830 align:middle line:84% in fortunes of the fossil fuel sector. 00:01:44.830 --> 00:01:47.350 align:middle line:84% If you dial back half a century, the oil and gas sector 00:01:47.350 --> 00:01:50.560 align:middle line:84% in America was actually the largest single component 00:01:50.560 --> 00:01:51.950 align:middle line:90% of the S&P 500. 00:01:51.950 --> 00:01:54.730 align:middle line:84% But then it began to shrink in terms 00:01:54.730 --> 00:01:55.870 align:middle line:90% of its relative footprint. 00:01:55.870 --> 00:01:57.670 align:middle line:84% A decade ago, fossil fuel companies 00:01:57.670 --> 00:02:00.730 align:middle line:84% were still incredibly powerful and strong, and so much so 00:02:00.730 --> 00:02:03.490 align:middle line:84% that most of them assumed they could brush aside 00:02:03.490 --> 00:02:07.450 align:middle line:84% the complaints and protests of environmentalists. 00:02:07.450 --> 00:02:10.330 align:middle line:84% But in the last year, as the ESG sector 00:02:10.330 --> 00:02:13.360 align:middle line:84% has swelled in power and might and confidence, 00:02:13.360 --> 00:02:15.910 align:middle line:84% not only have the share prices of the big fossil fuel 00:02:15.910 --> 00:02:17.860 align:middle line:84% companies fallen by half, but they're 00:02:17.860 --> 00:02:20.080 align:middle line:84% beginning to be forced to think about doing things 00:02:20.080 --> 00:02:20.985 align:middle line:90% like mergers. 00:02:20.985 --> 00:02:22.360 align:middle line:84% They're beginning to being forced 00:02:22.360 --> 00:02:25.570 align:middle line:84% to actually make pledges to cut back on their activities 00:02:25.570 --> 00:02:29.200 align:middle line:84% and to embrace renewables, and to show the world that they 00:02:29.200 --> 00:02:31.630 align:middle line:90% actually can be green. 00:02:31.630 --> 00:02:34.165 align:middle line:90% This is our historic moment. 00:02:34.165 --> 00:02:37.840 align:middle line:84% There are many reasons why the arrival of President Joe Biden 00:02:37.840 --> 00:02:43.300 align:middle line:84% has been a dramatic change in style and policy and tone, 00:02:43.300 --> 00:02:45.700 align:middle line:84% compared to the presidency of Donald Trump. 00:02:45.700 --> 00:02:48.700 align:middle line:84% But one area where the contrast is particularly strong, 00:02:48.700 --> 00:02:51.760 align:middle line:84% is in the area of ESG, and particularly 00:02:51.760 --> 00:02:53.170 align:middle line:90% the environmental issues. 00:02:53.170 --> 00:02:56.140 align:middle line:84% We desperately need a unified national response 00:02:56.140 --> 00:02:57.565 align:middle line:90% to the climate crisis. 00:02:57.565 --> 00:02:59.740 align:middle line:84% As soon as he arrived, President Biden 00:02:59.740 --> 00:03:02.080 align:middle line:84% rejoined the Paris Climate Change Accord. 00:03:02.080 --> 00:03:04.700 align:middle line:84% He pledged that he was going to try and clamp down 00:03:04.700 --> 00:03:06.700 align:middle line:84% on the fossil fuel sector and bring 00:03:06.700 --> 00:03:09.490 align:middle line:84% in much tougher environmental standards. 00:03:09.490 --> 00:03:11.890 align:middle line:84% All of that shows that America really 00:03:11.890 --> 00:03:15.310 align:middle line:84% is starting to embrace many of the environmental policies 00:03:15.310 --> 00:03:17.797 align:middle line:84% that so many have been asking for such a long time. 00:03:17.797 --> 00:03:19.880 align:middle line:84% But the really big question is, what happens next? 00:03:19.880 --> 00:03:25.210 align:middle line:84% Because in addition to debates around shale or fossil fuel 00:03:25.210 --> 00:03:28.570 align:middle line:84% or carbon, there's a whole set of potentially very important 00:03:28.570 --> 00:03:32.350 align:middle line:84% changes happening in terms of the investing landscape, which 00:03:32.350 --> 00:03:35.980 align:middle line:84% may or may not create a flood of money moving into ESG 00:03:35.980 --> 00:03:37.060 align:middle line:90% products going forward. 00:03:40.690 --> 00:03:44.020 align:middle line:84% Right now, it's actually surprisingly hard for investors 00:03:44.020 --> 00:03:47.230 align:middle line:84% in America to invest in ESG-friendly assets 00:03:47.230 --> 00:03:50.020 align:middle line:84% because the idea of fiduciary duty that's 00:03:50.020 --> 00:03:52.690 align:middle line:84% been upheld in the Washington agencies 00:03:52.690 --> 00:03:55.180 align:middle line:84% essentially says that fiduciaries, 00:03:55.180 --> 00:03:58.540 align:middle line:84% i.e. fund managers, can only chase financial returns. 00:03:58.540 --> 00:04:02.200 align:middle line:84% But if the Biden administration loosens those rules a bit, 00:04:02.200 --> 00:04:06.400 align:middle line:84% you could see a whole flood of money moving into ESG 00:04:06.400 --> 00:04:09.940 align:middle line:84% because suddenly pension funds and even retail investors 00:04:09.940 --> 00:04:12.290 align:middle line:84% will want to actually purchase instruments 00:04:12.290 --> 00:04:16.140 align:middle line:84% that can invest in ESG because they feel that it's easier.