DCriticism of the use of the term “ESG” – the abbreviation stands for “Environment, Social, Governance” – in capital investments has also reached the World Economic Forum in Davos. “ESG is too broad a term,” said Suni Harford, President of UBS Asset Management, at an event organized by the major Swiss bank UBS. “The spread between 'E' and 'S' is too big.” The criticism was particularly loud in parts of American politics last year, which the CEO of the investment company Blackrock, Larry Fink, announced a few months ago that he wanted to do so no longer use the term “ESG”.
Some convinced representatives of sustainability concepts (“environment”) in capital investments do not want to identify with all the social norms that are propagated in the concept under the letter “S”. In short: distancing ourselves from “ESG” goes hand in hand with the desire for a depoliticization of capital investment. Especially since, as it was said at UBS, the letter “E” can be linked not only to “environment” but also to “efficiency” – and then you would be in familiar territory of economic analysis.
And so Harford also cited an economic reason for the major Swiss bank's proposal to mobilize significant funds to preserve biodiversity. “Biodiversity is important for both the climate and the economy, because around 60 percent of global economic output is moderately or highly dependent on nature,” says a study presented at the World Economic Forum in collaboration with the ETH Zurich University. According to estimates, investments of around $700 billion per year will be necessary until 2030 to combat species extinction. “This task cannot be carried out by just one institution,” said UBS CEO Sergio Ermotti. States, business, science and the global community must come together.
Private investors can only be attracted if the investment process is transparent. Standards for these systems must therefore be defined. However, UBS also believes that an active role for states is necessary, which is remarkable for an institution that is traditionally very market-oriented. In a transitional phase, they should participate in mixed financing with private individuals before sufficient private capital can be mobilized: “For projects that do not offer clear revenue streams in the short term, financing provided on preferential terms may be necessary.” The major bank also supports more far-reaching government reactions . The awarding of agricultural subsidies could be linked to positive environmental results.
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