I'm curious. Why has Cash never been ESG’d as an asset class?
Graham PRECEY
L'aide aux entreprises pour équilibrer le triangle entre l'économie, l'impact social et l'impact environnemental. Helping business to balance the triangle between economics, social and environmental impacts
Its been bugging me for a while. ESG disclosure and impact has been demanded by investors in Commercial Property, Equities, Fixed Income, Loans and Infrastructure Assets for a long time but why is the the placement of Cash into financial institutions not given the same scrutiny?
Cash should ‘earth’ like a lightning bolt and be the quickest of all assets into the heart of cashflow of a real business. It should be easy to the calculate the ESG impact right?
A client of mine recently started asking questions of their Deposit Taker investment banks “If we place ￡1bn of cash with you for a 12 month period what is the ESG Impact of that Money?”
Simple question right?. Wrong.
All the investment banks could play back was “This is our ESG Strategy overall”…Guess what the next question is?
“Great….what is the ESG impact of OUR cash placed in your business on real businesses”
Then the tumbleweed sets in.....
I fear that the reality is that the financial institutions in fact never “earth” the money into real businesses at this scale. They just take cash in for an agreed return for an agreed period and it ends up in cash management vehicle after cash market after cash management vehicle and never ends up being passed through to a real business (That can be traced anyway!)
But there is hope and there is a way through this. Lets think a little laterally.
领英推荐
Triodos Bank has been publishing the “Know where your Money Goes” map for ages. https://www.triodos.co.uk/know-where-your-money-goes a cool tool for customers to see where their collective deposits are used as a loan book. Not exactly “Where does MY money go” but getting closer.
The work of https://www.crowdfunder.co.uk/ shows us another way. Put YOUR money in to a project that YOU select. A nice straight line of money going in and going to good use. A nice feel good factor on social and?environmental impact without the financial return.
Maybe the recent https://makemymoneymatter.co.uk/ campaign will start to tune us all into the power of money using celebrity pester power. This campaign is about transparency and not supporting certain sector of the economy such as Oil and Gas. But some good businesses we all need to scale up in the future to make life better need over investing in too!
A simple solution - Lets start asking the ESG Cash Questions.
A disclosure revolution in the ESG Cash space only starts if we all....simply take action.....Wherever you place your cash as an organisation. Just ask one thing of them.
If we give you this cash to manage. What is the return? AND what is the ESG Impact of the organisations that use the cash?
I can imagine a future ESG Disclosure standard for Cash Managers as we have with all asset classes which enables consumers to benchmark the performance and make an informed decision as you can with all other asset classes.
The only way to get there is to start experimenting and asking questions NOW. Why not give it a go?
CMO/CRO | Scaling B2B SaaS Businesses | Board Member & Committee Chair | Mentor | Sustainability Advocate | Former Microsoft & Salesforce Executive
1 年Overall cash is seldom reported except as a reserve % or for going concern purposes, so it’s a very valid point Graham PRECEY . I found one of my organizations had discussed ESG investing for a couple of years for its endowments, but not for its pension assets - all are under professional management and since they were doing ok, the question simply hadn’t come up at Board level…
Non-Executive Director, Chair, Pension Trustee, Advisor specialised in Investment Management and Sustainability. CISL Mentor at the Business Accelerator Programme
1 年Could not agree more Graham! Cash is still an effective asset, granted on the short-term side of the spectrum BUT still plays a part in funding the financial system. Risks and opportunities associated with trends like the environment tend to be long-term, but that should not prevent nearer-term tangible sustainable and impactful investments through Money market funds. Furthermore, the ESG lens should be applied to Money Market funds - sadly many governance MMF past failings caused by bypassing robust risk controls have caused severe and unexpected losses to investors. Strong attachment to ESG principles mitigates risks. As time passes, ESG-linked commercial paper issuance is rising and let's not forget that some of the early-movers green bonds are now entering the right time horizon to be considered into this investable landscape ...