ESG

"Greenwashing" Controversies Focus Minds On What Investors Own

Tom Burroughes Group Editor November 14, 2023

A senior figure at international multi-family office here and here.) This, so critics say, fosters cynicism about the wider drive for decarbonization, reducing forms of pollution, improving biodiversity, and other goals. It also comes at a time when political support for “green transition” policies is already creating pushback, such as over concerns about how the public will pay for it. 

Part of the issue may be that many firms moved into the ESG space in the aftermath of the 2008 financial crisis, a traumatic event that hammered the reputation (not always fairly) of free market capitalism and financial markets. 

A large amount of traditional finance moved into the ESG/impact sector after 2008, Emerson said. “When you have upheaval, people will look for new avenues to avoid past mistakes and, in this case, to bring greater integrity into the investment process. I celebrate the entry of mainstream financial actors into the impact investing community/markets.” 

What is clear, from Emerson’s point of view, is that the term “ESG” is a great deal more prominent than when he started out focusing on helping homeless people and other problems that needed addressing more than three decades ago.

AITi Tiedemann Global is neither a small boutique house nor a large institutional player but somewhere in between. “There is also a direct relationship with the senior leadership team,” he said.

“I’ve been involved in purpose-driven capital for about 30 years,” he said. “30 years ago, things were very different and it [Impact/ESG] was not mainstream.”

In the 1980s, Emerson founded and ran a leading homeless youth services program in San Francisco; he has also worked with various NGO and related organizations. In 1990, he was the founding director of a fund that invested in small and medium-sized enterprises, providing transitional employment for homeless people. He ran this fund for 11 years. Called REDF, the fund is a leader in venture philanthropy, social enterprise development and blended finance. While leading REDF, Emerson convened what is thought to be the first working group to formalize a methodology to calculate social return on investment – a framework which has been used by various for-profit and not-for-profit investors over subsequent years. 

AITi Tiedemann Global swings a large club in impact investment – it had $4.25 billion of dedicated impact investments as of June 30. It is not the largest, but the direction of travel is clear.

“The amount [of ESG investment] has certainly increased and also the amount of inquiry from prospects,” Emerson said. 

The firm has been through a series of changes. In May this year AlTi Tiedemann Global acquired Singapore’s AL Wealth Partners. That deal came a few months after AlTi Tiedemann Global was born out of the merger of US-based Tiedemann Group and London’s Alvarium. The combined organization oversees about $65 billion of assets under advice and administration.


Winners on all sides
Emerson talked about the idea of “mutual impact” – the idea that through impact investing one has the potential to become personally transformed while seeking to advance social and environmental transformation in the world – and that part of what has gone “wrong” with impact investing as it has gone mainstream is that impact investing is something one does to others (how many jobs has a person created, etc) as opposed to something that can deepen relationships with others and the world.   

“A great value is understanding that by pushing transformation in the world we have the capacity to become transformed ourselves,” he said. 

In fact, Emerson warms to the idea that properly considered, ESG and related ideas are a “win-win” way of looking at the world. 

Impact investing etc can be a part of the conversation between generations “about what matters,” he said. “This is about how you show up as a wealth holder in the world – and whether your capital is showing up in the world the way you would like to be present in the world.”

Continuum
Emerson discussed the way that impact investing sits alongside philanthropy. “There is a continuum of capital from philanthropy to near-market and market rate investment. It is a mistake to believe you must sacrifice financial returns to make an impact. All capital, all companies have impact – the challenge is managing all one’s assets to optimize the risk return and impact one seeks to generate through deploying capital in the world,” he said. 

“In public markets, where ESG comes from, ESG is a form of risk mitigation – you are really thinking about how to manage off-balance sheet risk factors represented by environmental, social and governance issues that influence your ability to make a return?” he said. 

“What is interesting to observe is the evolution of an integrated approach to and understanding of investment practice. ESG speaks to how those factors affect the financial performance of companies, while impact speaks to the companies’ generation of environmental, social and governance performance in the world,” he said.

“Clients seeking impact investment advice and practice is a significant growth area for our firm. And engaging families in discussions regarding the impact of their investments upon the world the `rising generation’ will inherit is a way for families to engage in deeper discussions regarding the purpose of their capital – moving beyond simple discussions of financial return to more critical conversations regarding value creation and its impacts upon the world,” Emerson continued. “These reflections enable advisors to be with clients as they pursue not simply financial returns but rather multiple returns of financial, social and environmental value creation.” 

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