China’s groundbreaking Green Finance Guidelines require both policy and commercial banks to establish grievance mechanisms for affected communities. The newly formed National Financial Regulatory Administration should see to it that Chinese banks implement this requirement.
As Adani Group stocks tanked last month, following revelations of fraud and market manipulation at the Indian conglomerate, some investors in ESG-focused funds were surprised to find themselves exposed to losses.
Earlier this year, my colleagues at Inclusive Development International published an investigation that revealed a staggering figure: more than US$13 billion of ESG-labeled investments have gone to companies involved in arming, funding and legitimising the brutal military regime in Myanmar. As shocking and disturbing as that is, it is not an anomaly.
In July 2016, environmental activist Gloria Capitan was brutally killed in front of her 8-year-old grandson in the Bataan province of the Philippines, allegedly due to her anti-coal advocacy as the leader of the Coal-Free Bataan Movement. Climate change is perhaps the biggest threat that humanity faces, yet the people who devote their lives to this cause are under attack.
ESG-labeled funds have exploded in popularity in recent years, hitting $3.9 trillion in assets under management last year. Driven by marketing claims that ESG is a way for investors to align their money with their values, it’s now the fastest growing sector of financial services. But these funds are littered with companies with appalling records.
The UK government body charged with enforcing the OECD’s standards on responsible business conduct called out the sugar industry’s sustainability association last month for admitting a company responsible for gross human rights abuses.
Examples like this don’t just undermine the credibility of ESG. They also make it much more difficult for victims of corporate abuse to secure accountability.
When the Asian Infrastructure Investment Bank (AIIB) was first announced by China in 2013, a flurry of speculation erupted around which countries would join and how closely the new institution would follow the path trodden by traditional multilateral development banks such as the World Bank.
