25 May 2022

Stuart Kirk is right – over-emotional discourse about climate change is distorting markets

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Britain’s biggest bank is facing calls to sack an executive for attacking climate change ‘nut jobs’ during a speech at a Financial Times conference last week.

Stuart Kirk, ‘global head of responsible investing’ at HSBC, has already been suspended for daring to suggest the whole ESG (Environment, Social and Governance) debate has become a tad over-emotional and vulnerable to distortion and hyperbole. Naturally, the ESG industry and HSBC’s leadership kicked into gear, expressing moral indignation at his comments, even though the speech was approved months ago and has been sitting on the company website. I will be surprised if he isn’t sued for the emotional hurt, pain, distress and damage he’s inflicted on ESG professionals.

Yet Kirk is a smart guy. He’s the former editor of the FT‘s Lex column, and had responsibility at HSBC for ESG and new green product development. I have watched his speech on the FT website, and it’s well worth a listen, even if you disagree. It will make you think, and it’s about time we did more of that when it comes to preparing for the consequences of climate change.

The somewhat hysterical quotes that have appeared in the media have been selective and denuded of context. Most of Kirk’s speech pushed against overly-emotional doom-mongers, like a lady from Deloitte called Sharon. Kirk noted that when she told the audience climate change meant everyone in the room was dead, most didn’t even look up from their mobile phones. He also criticised some chap called Mark, a former central banker making a fairly good living jetting around the world to spread climate hyperbole. Kirk got a decent clap at the end of his 15-minute pre-coffee conference slot.

Although Kirk’s comments have proven remarkably ill-judged in terms of his career longevity, they are worth thinking about. The most hyped quote is ‘who cares if Miami is six metres underwater in 100 years’ time’, before he explained, Amsterdam copes rather well with being below sea-level. He argued that solutions will be found because mankind adapts. He then talked about ‘nut-jobs telling me about the end of the world’.

And that’s the critical thing. Mankind is inventive, and we adapt. Coping with change is why we thrive. He was pretty scathing about climate doomsters and those who have made climate change the core of lucrative careers in finance. Former Bank of England Governor Mark Carney was quoted in a slide entitled ‘Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings as ALWAYS wrong.’ Spot on, or as I say: ‘things are never as bad as you fear, but seldom as good as you hope.’

Kirk’s focus was on how we adapt. As he said: ‘One of the tragedies of this whole debate, which we obsess about at HSBC, is that we spend way too much on mitigation and financing and not enough on adaption financing.’

I agree with him. I have written many times about the lack of joined-up thinking. Like trying to make wind farms without steel (which requires metallurgical coal) or how tidal is a much more reliable but more expensive solution than wind.

So, what was Kirk’s crime?

He has caused a massive problem for his employer. HSBC might make big profits and have plenty of capital, but it’s desperately short of banking credibility. The fact it’s being taken to the UK advertising authority for Greenwashing is revealing. Analysts have questioned its ESG culture, governance, ambition and stewardship in the wake of Kirk’s comments. Others have slammed its ‘fiduciary duty towards clients’ if it’s investing in non-ESG projects without a primary concern for saving them from climate change.

For years I’ve been warning about ESG distortions. I absolutely believe in mitigating carbon emissions and addressing climate change in a clear, transparent, and well-thought-out way. The path to transiting the global economy from fossil fuels to clean renewables needs to be planned and considered, not driven by hyperbole.

But there is a substantial danger that ESG is over-emotional, and that this is causing distortion. We need to focus on addressing climate change and keeping the global economy on track. Today’s key priorities should be market risks as stocks head into bear territory and the looming stagflationary collapse that is coming on the back of the consumer cost of living crisis.

Climate change is real, and it can be addressed by the markets to innovate, build and launch solutions, but what we have today is hysterical ESG distortions which are as much responsible for the West’s energy crisis as anything Vladimir Putin has done.

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Bill Blain is market strategist and head of alternative assets at Shard Capital.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.