Time to stop the feel-good circus

Allowing a bunch of circus clowns to lecture ANZ Bank investors about climate change and fossil fuels during the company’s annual general meeting is what happens when big business lets confusion reign about exactly what it is there to do. The rush to embrace environmental, social and governance measures as a proxy for corporate virtue was always going to open the floodgates to protesters making ever more extreme demands. In ANZ’s case the global warming “circus troupe” that snuck through security and changed in the toilets was there to admonish the bank for its continued lending to companies the protesters didn’t like. ANZ shareholders no doubt were more interested in the company’s expected $4.9bn takeover of Suncorp Bank and could have done without the theatrics.

The burlesque indulgence is a fitting end to a year full of investment challenges and woke disappointments. Going into 2024 with high interest rates forcing a new measure of corporate discipline, the question is to what extent big business will continue to indulge the fringe expectations of the protest set. Evidence is mounting that the ESG bandwagon is losing momentum as investors and the public at large run out of patience. This may be hard to detect against the loud voices of professional agitators who have made it their business to badger companies to save the planet first. But the evidence is there that investors and the public want companies to stick to making money for shareholders first. It is a message that has been heard loud and clear by some of the biggest names in private equity who previously have been the poster children of ethical investment.

The trend is most evident in the US, where the tide has well and truly turned. Wall Street firms that rushed to embrace sustainable investing a few years ago are closing funds as investors cash out in the face of disappointing returns. The Wall Street Journal notes the about-face comes after tightened regulatory oversight, higher interest rates that have slammed clean-energy stocks and a backlash that has made ESG investing a political target. Veteran investment manager Terrence Keeley says the best way to understand ESG is that it “morphed out of the United Nations principles for responsible investing and somehow ended up becoming the grossest misallocation of financial assets in history”. ESG strategies have underperformed broader indices and arguably have generated no tangible social or environmental progress that would not have taken place otherwise.

Closer to home, research into the emphatic rejection of the Indigenous voice to parliament referendum suggests the backlash is not confined to investment markets and may hold valuable lessons for the political class as well. The research, conducted by the Institute of Public Affairs and Advance Australia, shows most voters across all demographics and party loyalties believe the political campaigns of big business do not reflect the values of mainstream Australia.

The poll of more than 3500 Australians taken in the days after the referendum found 64 per cent of respondents agreed with the statement “The involvement of big business in political issues doesn’t reflect my values”, and only 4 per cent disagreed. A measure of how out of touch corporate Australia and sections of government have become can be found in the fact Greens voters are the ones most likely to support the political agenda of big business. The results of the poll should be of no surprise to companies such as Qantas that have led the charge on corporate campaigning for progressive lifestyle and equity issues but taken their eye off the main game. The IPA’s takeout from the polling is that big business speaks for a small circle of rich elite chief executives who are more interested in virtue-signalling than standing up for the interests of mainstream Australia.

It may well be that the voice referendum will come to define the high-water mark in community tolerance for a government-knows-best agenda driven by progressive forces. But the Albanese government risks turning a deaf ear to these concerns as it doubles down on subsidies for a green-energy transition that is making slow progress. The opportunity is there for Peter Dutton to build on sentiment highlighted in recent polling that he represents a more experienced and therefore consequential leader. Like investment managers, politicians need to follow the money and realise that talking the talk is no substitute for delivering the things that matter, financial security and a safe pair of hands.