Nicolai Tangen supports ESG investing ideology, financing companies which follow environmental, social, and governance rules.
Nicolai Tangen is head of Norway’s $1.6 trillion sovereign wealth fund, one of the world’s largest investors. Norway socialised its income generated from its national oil exports and invested in a sovereign wealth fund. Today, Norway’s sovereign wealth fund, one of the largest in the world, is equivalent in size to $281,000 for every Norwegian with a heartbeat.
A Scandinavian socialist fairy tale that comes true?
Typically, States with enviable natural resources within their borders end up totalitarian regimes with a paranoid ruling class living like royalty and beefed-up armies on standby to fend off potential pirates from looting their national treasuries.
But Norway is an exception.
“Nicolai Tangen is head of Norway’s $1.6 trillion sovereign wealth fund, one of the world’s largest investors”
WEALTH TRAINING COMPANY
Nicolai Tangen supports ESG investing ideology which is at odds with some of the world’s heavy-weight investors
“There is too much greenwashing around it. Too much virtue signalling. People think if they hang up an ESG sign, they are a virtuous company,” said Lynn Forester de Rothschild, the public face of the infamous Rothschild dynasty who is on a mission to promote inclusive capitalism.
ESG investing does fine, like all assets when central banks are pumping the system with liquidity to keep assets prices propped up.
When the system is flush with cash, a dart-throwing monkey can pick winning assets.
But the moment the money taps tighten, reality sets in, where a company’s profit and losses matter again.
When the Fed’s unprecedented Fed rate hikes and quantitative tightening eventually hit financial markets in the early third quarter of 2023, ESG investors lost billions of dollars.
The market for environmental, social and corporate governance, or ESG, investing is fundamentally broken, argued some investors.
“ESG investing … entering the final quarter of 2023 continues to be a story of declining flows and assets under management,” said Robert Jenkins, head of global research at Lipper.
“There is too much greenwashing around it. Too much virtue signalling. People think if they hang up an ESG sign, they are a virtuous company”
LYNN FORESTER DE ROTHSCHILD
Nicolai Tangen supports ESG investing as survival pushes ESG investing off the radar
The war in Ukraine was probably a tipping point for ESG investing.
“The anti-ESG sentiment in the US was festering throughout 2021 you know, but it was underneath the surface. But then the Ukraine war broke out and people started questioning whether we should invest in defense companies again and weapons manufacturers. People also started questioning energy and oil supplies. That was the tipping point, it pushed us over,” Robert Jenkins, head of global research at Lipper.
“There’s a good reason why you want to have diversity on boards, and if there is a backlash against that development, that’s a negative development”
– Nicolai Tangen
Nicolai Tangen supports ESG investing ideology and wants to see more diversity in corporate boardrooms
Nicolai Tangen said that he is concerned about the growing backlash against ESG investing.
The fund is part of a growing number of investors and policymakers pushing to put more women in company boardrooms. The sovereign fund invests in over 8,800 companies worldwide and owns on average 1.5% of all the world’s listed companies.
Since 2021 CEO Nicolai Tangen asked companies to consider targets if fewer than 30% of directors are female. In developed markets, the fund votes against a company if it does not have a minimum of two women on its board – in Japan, a minimum of one.
Nicolai Tangen also expressed concerns that some US investors were becoming less concerned about the risk posed by climate change to businesses.
Nicolai Tangen was questioned about the recent controversy at Harvard, in which the university’s first Black president resigned and whether it had implications for the corporate sector, Tangen said the push for diversity at the top of US companies could be next targeted.
“There could be something opening up there, it could follow the development we have seen on the backlash against climate,” Nicolai Tangen said. “It would be a negative development.”
Tangen said having diverse directors on a board leads to better discussion and thus, to better decisions.
“There’s a good reason why you want to have diversity on boards, and if there is a backlash against that development, that’s a negative development,” he said.
“GI believe that ESG as a term should be put in the dustbin”
– Lynn Forester De Rothschild
So, should deciding whether the company sits within the ESG ideology be a more important factor than performance going forward?
Backing ESG ideology, as good as it sounds, might not be sustainable.
Companies are in the business of supplying the market, employing factors of production as efficiently as possible to make a profit. Capital is attracted to profitable companies, and more often than not, a company is profitable because it provides goods and services that the market wants and needs.
An educated public with truthful media that highlights a company making products that damage health, use child labour or are prejudiced, disrespect the environment, poison rivers, and turn green spaces into dump tips would repulse the public, crash sales and bankrupt the company.
The free market and truthful media efficiently flush out bad operators.
ESG investing ideology can only survive on the endless artificial life support of central bank liquidity, which is unsustainable.
“I believe that ESG as a term should be put in the dustbin,” said Lynn Forester de Rothschild.
“I would go back to a narrative of what great companies in history did to be great. How are they treating the planet?” she added. Would Nicolai Tangen agree to sit her on the company’s board?
Nicolai Tangen supports ESG investing ideology as another heavyweight investor rejects it and promotes inclusive capitalism
This multi-billion dollar debate impacting investing today could conclude with modern capitalism morphing into something unrecognisable, or maybe ESG will be just another fad with investors losing billions.
The jury is out.
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