Gneiss Head of Capital Markets Rich McGlashan shares his views on the impact of increasing ESG regulation on Capital Markets.
The honesty trade - addressing real-world issues of ESG and climate change within capital allocation.
Even the catch-all acronym of ESG (V2.0 of SRI et al), headlines the simplistic and stylistic approach that capital markets deploy in the first instance to simplify every marketplace and world dynamic – at the macro and marketing level. Even the focus on each component part is more ‘Eurovision’ than ‘multi-generational’ in approach. See the backseat ‘Governance’ has taken in recent times, as the government has clambered to get on the SPAC bandwagon, just in time for the music to become eerily quiet. If the acronym has validity, there needs to be equality of factors and consistency of approach.
From an environmental and climate change perspective, capital markets have seen a gold rush of consultancy and origination fees and deployed multiple quick-fix, platform and rating solutions which have exacerbated the incoherence of the landscape and driven a lack of genuine and protracted behavioural change – all secreted into the nattily entitled TCFD (Task force on climate related disclosures) framework. The genuine issue is the requirement for a deployable framework solution to a heterogenous problem at the corporate and nation state level.
Multiple complications remain, including the additional feedback loop and the second order effects. Additionally, the cure might well be worse than the disease in terms of lifespans – if not planet-span – given the protracted timelines involved.