Is the business world going off ESG? Just look at COP29

Eric Tao, the trading desk head at Pierpoint investment bank, is never one to mince his words. Leafing through the programme of the Cop environment conference, he reads: “‘The maximum amount of money, doing the maximum amount of good’: Can you smell the bullshit coming off that?”
Eric may be a fictional character in the BBC’s hit TV romp, Industry, but his cynicism over the summit is based, at least partly, on a growing reality in some parts of the investment world.
After a golden period for “environmental, social and governance” (ESG) investing, the cost of living crisis, the war in Ukraine and a resulting surge in populist politics have left green investment flagging.
Some say that the real-life Cop conference taking place next month in Baku, Azerbaijan, is symbolic of the apathy. Where “Cop28” last year in Dubai saw as many as 70,000 attendees, this year’s Cop29 is expected to host perhaps only 40,000 to 50,000, according to a spokesman. “A case,” one delegate says wryly, “of good Cop, bad Cop.”
Not only that, but the heft of the corporate attendees looks set to be diminished. In previous years, the chief executives of the biggest companies in the world have been in attendance. This time, they are sending theirsubordinates, or nobody at all. JP Morgan, Lloyds, Bank of America and Standard Chartered are among the financial powerhouses declining to send their top brass, unlike at previous summits. PwC is sending its global ESG leader Will Jackson-Moore, but his delegation will be far smaller than it was in Dubai.
The head of one consultancy, which has opted not to send anyone, said: “I have been to Cop 26, 27 and 28 but I am not going to 29. Why? Because none of my clients is going to be there.”
There is, he said, a growing concern in the ESG investment world that the United Nations, the organisation behind these summits, has a “Cop flop” on its hands.
Another Cop regular not packing his passport for Baku said companies in his sector, insurance, had become increasingly nervous about “ESG blowback”. Activist groups such as Just Stop Oil have been forensic in tracking down oil and gas-linked businesses and protesting at their offices. “If you turn up at Cop and they find out that part of your business is insuring a gas pipeline, they’ll trash you for greenwashing,” he said.
On the flip side, he added, if you do pull out of sectors such as oil and gas and trumpet your green credentials at Cop, you risk being attacked by the American Right. Witness Larry Fink, head of one of the world’s biggest investment companies, BlackRock, who was vilified by Republican congressmen for pushing companies in its portfolios to consider their impact on climate change.
Fink, who attended Dubai last year, is not going to Baku, and no longer uses the phrase “ESG” in his public statements.
But how much should we read into the Baku Cop problems? Will a poor attendance be seen as one of the big, telling moments of the demise of ESG investing?Or just a short-term blip?
When reports of Baku’s difficulties were first raised in the Financial Times last week, it was just hours after the Reuters news agency reported that BP was set to drop its carbon emissions targets. Like Shell’s boss Wael Sawan, BP’s chief executive Murray Auchincloss has been scaling back the wide range of green energy projects embarked on by his predecessors.
Meanwhile, according to the latest data from the Investment Association, the leading trade body for the fund management industry, the public pulled a net £343 million out of “responsible and sustainable” investment funds in August, albeit that still leaves a total of £104 billion of assets under managementin such funds.
It is a trend that began in 2022 as oil and gas prices boomed after Russia invaded Ukraine. When shares in oil producers and defence companies soared, ESG returns were left lagging traditional investments.
As ever, Industry’s scriptwriters nail it, with a storyline where fund manager Petra Koenig and her analyst Harper Stern turn up to the Cop summit to try and lure green investors to their dirty fund. “I bet I can prove returns trump ideology,” Koenig says.
Such cynicism aside the amount of money going into green projects is still increasing, hitting about $1.8 trillion (£1.4 trillion) last year — the highest-ever level. And, as the Investment Association points out, August’s net outflows from ESG funds were slower than July’s £390 million.
Chuka Umunna, the former shadow business minister, who now works as the global head of sustainable solutions at JP Morgan — widely seen as the inspiration for Industry’s fictional Pierpoint bank — said: “It’s true that green economy stocks have taken a big knock over the last year or so. The ECO index [of the world’s biggest green economy stocks] is down 32.9 per cent year to date, while the S&P 500 is up 21.2 per cent.
“But I would not attribute that to investors taking the theme less seriously, or being driven by anti-sustainability noise from some lawmakers. It has a whole lot more to do with our clients in green economy sectors being disproportionately affected by higher interest rates given their greater upfront capital costs.”
He hoped the recent interest rate cuts would help them, noting that the ECO index was up 10.3 per cent in the past month — outperforming the wider S&P 500.
While he is not going to Baku, it would, Umunna suggested, be wrong to write off sustainable investment.
One board-level director of a bank who generally goes to the Cop summits said that, while he was skipping Baku, this was largely because of the location and the way it is being organised, not because of any retrenchment from ESG.
“Logistically,” he said, “it is im-f***ing-possible to get to Baku. There are no direct flights and the business zone at the conference is not of the same scale as [previous Cops at] Glasgow or Dubai.”
Others said their companies’ security teams had voiced concerns about sending high-level executives to Azerbaijan, particularly while neighbouring Russia was at war.
Cop29 was supposed to be in Bulgaria but, as a neighbouring country, Russia had the ability to veto the location. It did just that — on the basis that Sofia was supplying weaponry to Ukraine.
It is not just the geography that is putting off business delegations. Several said Baku was being organised so it was more difficult for those from the private sector to mix with policymakers.
Some complained that the so-called Blue Zone areas — reserved for the highest-level government officials — and the Green Zone for the lower orders, including business people, were being kept too separate, reducing the opportunity for interaction.
This may be deliberate. Some UN organisers were frustrated by how last year’s event in Dubai was too big. “It was a corporate bunfight,” said one official. “This is supposed to be about advancing the human efforts to lower CO2 emissions. But corporates turn up in force and it all becomes about their corporate positioning, backslapping and posturing. We wanted to tone it all down and bring it back to previous levels.”
He also pointed out that there are direct flights from Heathrow on Azerbaijan Airlines (although it is trickier from the US). And, when asked about the security issue, he said that staging the event in a police state meant the safety of delegates was not in doubt.
One think tank executive who was at Dubai had some sympathy for a lower-key summit: “Cop stands for Conference of the Parties — it’s supposed to be a negotiating forum where experts assess how countries are measuring up to their climate change commitments, and how they need to adjust in order to meet them in the future. Dubai was just too big for anything to be meaningful.”
Even if the top-level business leaders are not attending, the big banks and insurance companies will be sending delegations, he said. “There are very big infrastructure projects that will be negotiated there that need to be financed and insured. Companies go to the Cops to make tons of money. They’ll be there.”
David Howden, founder of the London insurance broker Howden, said he was still undecided about whether to attend. “I normally go to Cop because we do an awful lot of work helping the transition [to a low-carbon economy],” he said. “I’m still evaluating my plans, but my team is going to be there in force. There is going to be a major insurance and resilience push in Azerbaijan, which I am really excited about and am going to push hard.”
Howden is known in the insurance world for his enthusiastic support for backing projects that, sometimes, make more environmental than financial sense.
Perhaps, as one delegate said, Cop could benefit from having fewer, more ideologically driven delegates. What they don’t want was probably summed up best by Industry’s Eric Tao: “just a bunch of suits cosplaying environmentalists”.