Is the whole notion of ESG disclosure a massive distraction? In 2021, Tariq Fancy of Blackrock called it a distraction for climate action. And I tend to agree because it tries to pass on the responsibility of climate action into the hands of the market, that had continually proved incapable of generating endogenous climate action. Sure, you need the market to scale solutions, and drive the expansion of some of the good things that will benefit the climate. But to think that the market can drive change just purely from the realisation of climate change as a problem is naive.
By leaving the type of climate action and the labelling of what counts as green to the market will simply generate greater confusion and inaction as we have seen from the proliferation of funds that tout sustainability or impact, or both and often still trying to pair that with financial returns, etc. The extra cost that goes into reporting, emissions accounting and massive resources around disclosure standards and all simply drives activities for the big consultancies without diverting energies towards the direction of climate action.
The issue is that greenwashing is real and pretty easy. And that can take the form of superficial disclosures that tosses buzzwords around. Yet there are corporates taking genuine action drowning in this sea of sustainability marketing and PR nonsense, being accused of greenwashing when they are trying to make a difference. If it was all going to boil down to rules, regulations and laws, then there won’t be ESG funds and non-ESG funds or government having to regulate disclosures. There won’t be accusations of greenwashing because you are either green or just illegal/non-compliant.
Regulation is of course a complex topic for another day but it has to be worked on. Regulating disclosure is unlikely to be enough.