Jonathan Ford had an excellent column in the Financial Times this week. He correctly noted that the enormous increase in debt to finance the economy over the last several years makes it much less resilient for survival when times get tough. In particular he notes that this downturn “follows more than three decades of financial triumphalism. ” And indeed bankers are responsible for that “triumphalism” as many of them saw it as a way to increase profits and more importantly their personal bonuses.
However Ford throws in a remark on ESG goals that from my perspective has no relationship with the rest of his premise. He notes that now is the time “for pension funds to spend less time burnishing their ESG criteria and get back to basics.” Whilst I agree with the need for getting back to basics, I would argue that a proper and holistic focus on ESG is precisely the way for investors and bankers to support a healthy real economy that is not over reliant on debt.
Whilst there can be proper reasons to be critical of ESG approaches, they have nothing to do with the overall increase in borrowings. So it is not necessary to mix the apples of ESG with the pears of an over leveraged economy.
