City's ethical investing obsession branded ‘a huge mistake'

Telegraph

01-07-2025

The City's obsession with ethical investing was a 'huge mistake', the chairman of investment giant Aberdeen has said.
Sir Douglas Flint told a conference earlier this week that fund managers had made 'ridiculously extravagant claims' about 'saving the world' instead of focusing on profits.
He said: 'Our industry then made a kind of huge mistake, it became a marketing thing, let's tell everyone we're saving the world, we're saving the planet.'
In some cases, he said some investors adopted a mindset of 'we're not really about investing money, we're just jolly good people and we're saving the world'.
Not only did this distract from their main role as investors, it also opened up funds to the threat of legal claims, he said.
Sir Douglas, who was formerly chairman of HSBC, said statements around ESG and diversity were now 'in every search engine for a US litigation lawyer', creating a potential 'feast' for lawsuits.
His comments form part of a broader corporate roll-back on ESG, exacerbated by Donald Trump's diversity, equity and inclusion (DEI) crackdown in the US.
This has led to many high-profile companies – including McDonald's and Harley-Davidson – watering down their DEI programmes, while others have rolled back net zero initiatives.
This has also applied to the fund managers.
The Net Zero Asset Managers Initiative, a coalition of investment firms that had pledged to support the transition away from fossil fuels, ceased its activities in January before Mr Trump took office.
The retreat from ethical investment has coincided with a surge in people pulling cash from ESG funds.
According to data from Morningstar, investors withdrew a record $8.6bn (£6.2bn) from sustainable funds in the first quarter of 2025.
Sir Douglas said fund managers were now treating environmental issues in a 'much more rational way'.
He said: 'We try and choose the companies that are making the most effective steps towards transition in the portfolios that we manage.
'But it's our clients who mandate the areas and the pace that we go at.'
However, the backlash against ESG investing has not been ubiquitous in the City.
Speaking at a London Climate Action Week event last week, Bill Winters, the chief executive of Standard Chartered, said he was ashamed to have been 'nowhere near as vocal in this environment as I had been at earlier times'.