Forget about politics: ESG is critical to tackling climate change and securing our economy
- Media Manager
- Sep 19, 2023
- 2 min read
Microsoft Start - The Hill
Written By: Günther Thallinger,
Published: September 19th, 2023
From the halls of the Capitol to the steps of statehouses across the U.S., policymakers are locked in a fierce debate about ESG.
Even titans of the financial world, such as BlackRock CEO Larry Fink, have begun to stop using this term, partly to avoid accusations of being part of a “woke” establishment. Meanwhile, Republican legislators across the country have accused many major institutions that have embraced the practice of putting a divisive ideology ahead of investor returns and “boycotting” vital oil and gas industries.
While some applications of ESG, which stands for environmental, social and corporate governance, are valid for healthy debate, a theme is seemingly emerging in which all such investment considerations are seen as ideological. Similarly, there has been an increase in political “anti-ESG” commentary, which threatens to undermine investors’ ability to tackle some of the most widely recognized and science-based ESG risks, including those posed by unmitigated climate change.
At this point, the science is unequivocal: Climate change is affecting the global economy and promises to do more harm if we continue with a business-as-usual approach. Damages from natural disasters, which are exacerbated by climate change, totaled $165 billion in 2022 alone. According to a study by Swiss Re, a multinational reinsurer, climate change could reduce economic output worldwide by $23 trillion by 2050, equivalent to the entire U.S. GDP in 2021.
These numbers speak for themselves. The effects of rising temperatures are reverberating across the economy, depressing productivity, increasing scarcity and imperiling the continued health of the global economic system. For long-term institutional investors, adverse climate impacts pose an existential threat.
